The position is that exemptions from income tax are available to individuals aged 65 and over during a year of assessment in accordance with the provisions of section 188 of the Taxes Consolidated Act 1997.
For the years of assessment 2012, in order to qualify for the exemption an individual's income must be less than €18,000 in the case of a single individual or €36,000 in the case of a married couple or civil partners.
In addition, these exemption limits are increased by €575 in respect of each of the first 2 qualifying children and by €830 in respect of each subsequent qualifying child. The section also provides for marginal relief where an individual's total income exceeds the exemption limit applicable to that individual, but does not exceed a sum equal to twice that limit.
Where marginal relief applies the individual is taxed at 40% on all income above the exemption limits to a ceiling of twice the exemption limit. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system. It should be noted, however, that where the individual's income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment between the use of marginal relief or the normal tax system.
It should be noted that a "qualifying child" is a child, resident with the claimant, who is born in the tax year and who is under 18 years of age at the beginning of the tax year; or, if over 18 at the beginning of the year, is receiving full-time instruction at an educational establishment, or is permanently incapacitated by reason of mental or physical infirmity from maintaining himself or herself and had become so incapacitated before the age of 21 or while receiving full-time instruction at an educational establishment. Further details are available on Revenue information leaflet IT8 — Income Tax Exemption and Marginal Relief — available at www.revenue.ie.