Older people’s tax credits and reliefs
Information
If you are aged 65 or over, you are liable to pay income tax in the normal way. However, the tax exemption limits are much higher for people aged 65 or over and there are some extra tax credits.
It is possible to get tax relief for covenants to people aged 65 and over.
In certain circumstances, you may be able to reclaim any DIRT (Deposit Interest Retention Tax) paid.
Budget 2012:there will be no change in personal tax credits or in the exemption limit in 2012.
Rules
Income tax applies to almost all income. People aged 65 and over are subject to the same general tax rules as everyone else but they do get higher exemption limits and some extra tax credits.
The way in which pensions and some other social welfare payments are taxed is described in our documents about taxation of pensions and taxation of social welfare payments.
The tax relief available for pension contributions and the tax treatment of personal pensions are described in Personal pensions and Occupational pensions.
Tax credits for health insurance and long-term care insurance and tax relief for medical expenses are described in our document about taxation and medical care. People aged 60 and over can claim additional tax relief for health insurance.
In general, if you are taxed exclusively under PAYE (this includes people whose non-PAYE income is taxed by having it coded into their determination of tax credits) you are not obliged to make an annual return.
If you are not taxed under PAYE (i.e. you are taxed under the self assessment system) you are obliged to make an annual return by 31 October each year
Tax exemption limits
Exemption limits are income limits below which no tax is payable.
Annual exemption limits for people aged 65 and over
| Status | 2011 |
| Single or widowed or surviving civil partner | €18,000 |
| Married or in a civil partnership | €36,000 |
| First two children | €575 each |
| Subsequent children | €830 each |
If you expect that your income for the year will be less than these limits, you should contact Revenue and they will issue a revised determination of tax credits to you. If your income is not much above these amounts, you may get what is called “marginal relief”. That means that you do not go back into the normal tax system – instead you pay tax at a rate of 40% on the amount by which your income exceeds your relevant exemption.
The point at which marginal relief ceases to be of benefit varies with your family circumstances and the tax credits to which you are entitled.
You can find more information about income tax exemptions and marginal relief on Revenue’s website.
Tax credits
Tax credits are only relevant if you have a taxable income. Tax credits reduce the amount of income tax that you have to pay. How your tax is calculated depends on your income. Your tax credits are deducted from the gross tax to get the amount of tax that you have to pay.
Everyone is entitled to a personal tax credit at either the married/in a civil partnership, single or widowed/surviving civil partner rate. People who pay tax under the PAYE (pay-as-you-earn) system also get a PAYE tax credit. This PAYE tax credit is also available to pensioners who receive their social security pension from another EU member state; they do not pay tax at source but pay tax annually. People aged 65 and over also get an Age Tax Credit.
Age Tax Credit
This is additional to the personal tax credit and may be claimed once you or your spouse or civil partner reaches the age of 65. It will be phased out over 4 years from 2011.
| Age Tax Credit | 2011 |
| Single or widowed or surviving civil partner | €245 |
| Married or in a civil partnership | €490 |
If you or your spouse or civil partner are 65 or over contact Revenue to claim this additional tax credit.
Dependent Relative Tax Credit
This credit is granted to if you pay tax and maintain, at your own expense, any person who comes within any of the following categories:
- A relative, including a relative of your spouse or civil partner, who is unable to maintain himself or herself as a result of old age or ill-health
- A widowed parent / surviving civil partner parent of either yourself or your spouse or civil partner, irrespective of the state of his/her health
- A son or daughter of either yourself or your spouse or civil partner who lives with you and on whose services you must depend as a result of old age or ill health
The relative’s own income must be below a certain amount to claim this tax credit. This tax credit is €70 for 2011. More information is available in our document about dependent relative tax credit.
Allowance for employing a carer
If you employ a person to take care of an incapacitated member of your family, you may get an additional allowance. The maximum allowance is €50,000. Relief for employing a carer is allowable at your highest rate of tax. For more information contact Revenue.
Covenants
If you are a higher rate taxpayer and you want to help support a person on a low income, it may be worthwhile to covenant the money.
The person to whom you covenant must be 65 or over or be permanently incapacitated. If the conditions are met, you can claim tax relief on an amount up to 5% of your taxable income; however, there is no limit if the person is permanently incapacitated.
Covenants are most effective if the recipient does not have a taxable income. The amount you covenant may be taxable in the hands of the recipient. It is important to note that money covenanted to people receiving a non-contributory pension or means tested allowance may affect their entitlement to the allowance in question. You can find more information about deed of covenants.
Tax relief for rent
Tax relief is available to people aged 55 and over for rent paid for private rented accommodation. This will be phased out over 7 years, starting from 2011.
You cannot claim relief if you were not renting before 7 December 2010.
| 2010 | 2011 | |
| Single | €4,000 | €3,200 |
| Widowed | €8,000 | €6,400 |
| Married | €8,000 | €6,400 |
This relief is allowed at the standard rate (20%). This means that the maximum amount a single person over 55 can claim is €640 (€3,200 x 20%) for rent paid. The maximum amount a married couple/people in a civil partnership or a widowed person/surviving civil partner over 55 can claim is €1,280 (€6,400 x 20%) for rent paid. You can find out more in our document about tax relief for private tenants.
To claim this tax relief download a rent relief claim form (pdf). The form is also available in your tax office, or from Revenue’s forms and leaflets service by telephoning lo-call 1890 306 706. Staff in your local tax office can answer any questions you may have and can provide help with filling out the form. You should return your completed form to your local tax office.
Deposit Interest Retention Tax
Deposit Interest Retention Tax (DIRT) is deducted from the interest payable on savings in banks, building societies, etc. This happens whether or not you would normally be liable for tax. If you are aged 65 or over or your spouse or civil partner is aged 65 or over or if you are permanently incapacitated, you may not be liable for DIRT if you are exempt from income tax.
You can notify your financial institution so that they can pay your interest without deducting DIRT.
How to apply
You can apply to your Inspector of Taxes for the credits described or for the application of the exemption limits to you.
Forms for covenants are available from the Revenue Commissioners and in banks and other financial institutions.
Where to apply
You can use one of the lo-call telephone numbers to contact Revenue. You can find more detailed contact addresses for your region on Revenue’s website.
