Dáil Éireann Debate, Thursday - 17 February 2022
193. Deputy Emer Higgins asked the Minister for Finance when the tax exemption limit for persons aged 65 years and over will be reviewed in order that it increases in line with the increase in the old age pension; and if he will make a statement on the matter. [8882/22]
View answerThe general position is that all tax expenditures and reliefs fall to be considered as part of the annual Budget and Finance Bill process.
In relation to the annual age exemption limits, section 188 of the Taxes Consolidation Act 1997 (TCA 1997) provides for these exemptions and associated marginal relief. Where the age exemption applies the claimant’s income will be exempt from income tax in that year.
The age exemption applies for any year of assessment where an individual is aged 65 years or over and his or her total income does not exceed €18,000. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.
Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies the individual or couple is taxed at 40% on all income above the exemption limit 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 as between the use of marginal relief or the normal tax system of credits and bands.
As the Deputy will be aware, Budget 2022 included a significant tax package amounting to a cost of €520 million. This included a substantial income tax package comprising of an increase of €50 in each of the main tax credits – personal tax credit, employee tax credit and the earned income credit – from €1,650 to €1,700. An increase of €1,500 in the income tax standard rate band for all income earners was also introduced. Furthermore, the 2% rate band ceiling for USC was also increased for 2022 in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate of €10.20 to €10.50 will remain outside the top rates of USC. Further details can be located at the following link: www.gov.ie/en/publication/7e491-taxation-measures/.
Having regard to the fiscal demands and pressures facing the State in 2022, it would not have been possible to increase all tax credits and reliefs and remain within the fiscal parameters. However, it is worth pointing out that the age exemption limits are at a level which compares favourably with the tax treatment of the generality of taxpayers.
Additional guidance on a range of other tax credits and reliefs, such as the age tax credit, that may be available for individuals over 65 years of age can be found in Tax and Duty Manual Part 15-01-26, which can be located at the following link – Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-26.pdf.
In addition, it is also worth noting that the State Contributory Pension and the State Non-Contributory Pension are not chargeable to Universal Social Charge or Pay Related Social Insurance.
Taking all of the above factors into consideration, I am satisfied that the age exemption limits in their current form are appropriately calibrated at present and there are no immediate plans to review or amend the limits.
