What you need to know
The last number of years have seen a number of small but significant changes for persons aged 65 and over for both taxation and social welfare purposes.
Firstly, no tax is payable by an individual aged 65 or over for 2014 where their income is less than €18,000 or €36,000 for married couples. It is important to note that in determining this limit income from all sources including the State Pension are aggregated to determine has the income threshold be exceeded. As many readers will be aware, the Department of Social Protection now provide the State Pension details to the Revenue and this allows them to aggregate the State Pension with other income.
It would be recommended that an individual contact the local Revenue office prior to receiving their State Pension and ask Revenue to update their certificate of tax credits. This will ensure that the correct tax has been deducted once the pension is received and that Revenue will not be looking for a lump sum tax payment at the year-end. Budget 2014 has seen an increase in the DIRT rate from 33% to 41%. It should be noted that this rate of tax will also apply to any foreign deposit interest that the individual may be receiving.
The Universal Social Charge (USC) does not apply to the State Pension. However, if the individual has other income exceeding €10,036, USC up to 7% for under 70’s without a medical card and 4% for over 70’s applies. Where income exceeds €60,000 the 7% rate can apply as normal. PRSI is not payable by individuals aged 66 and over.
Tax relief on medical insurance premiums is being capped at €1,000 per adult. The likely effect of this is to increase insurance premiums.
Where an individual carries out qualifying home repair, renovations or improvement works on your principal private residence you may claim a credit for any VAT paid at the 13.5% rate. The minimum spend is €5,000 and maximum is €30,000 (both are exclusive of VAT) incurred between 25 October 2013 and 31 December 2015. The credit is only available against income tax paid and not the USC. Revenue has issued a leaflet on the relief.
The transition State Pension that was paid between 65 and 66 ceased in 2013. The telephone allowance is also no longer payable.