Neale Richmond
Question:55. Deputy Neale Richmond asked the Minister for Finance his views on whether spousal maintenance should be tax deductible as is child maintenance; and if he will make a statement on the matter. [62577/22]
View answerWednesday, 14 December 2022
Questions (55)
Written answers
I am advised by Revenue that the tax treatment of maintenance payments varies depending on:
1. whether the maintenance arrangement in place is legally enforceable or voluntary,
2. whether the maintenance payment is made for the benefit of the other party to the relationship or a child, and
3. the basis of assessment applicable to the couple.
Where the payment is legally enforceable and is made for the benefit of the other party to the relationship, the recipient is subject to income tax, USC and PRSI on the amount received and the paying spouse or civil partner is entitled to an income tax deduction for the amount paid. Where a legally enforceable payment is made for the benefit of a child, the payment is disregarded. In such cases, the recipient will not be subject to income tax, USC or PRSI on the amount received and the payer will not be entitled to a deduction for the payment made. Therefore, spousal maintenance payments that are legally enforceable are tax deductible for the payer, however, child maintenance payments are not tax deductible for the payer.
A maintenance payment will be legally enforceable if it is made pursuant to an order or rule of court, deed of separation, trust, covenant, agreement, arrangement or any other act giving rise to a legally enforceable obligation arising on foot of:
1. the dissolution or annulment of a marriage or civil partnership, or
2. the separation of the parties to a marriage or civil partnership where such separation is expected to be permanent and there is no possibility of reconciliation between the parties.
Where the payment does not meet the above criteria it will be treated as a voluntary maintenance payment. Voluntary maintenance payments are disregarded for income tax purposes. This means that the recipient will not be subject to income tax, USC or PRSI on the amount received and the payer will not be entitled to any deduction for the amount paid. As such, for voluntary maintenance payments, the payer is not entitled to a tax deduction in respect of such payments.
The tax treatment outlined above, relating to legally enforceable or voluntary payments, applies where the parties are assessed to tax as single persons at the time the payments are made.
In summary, legally enforceable spousal maintenance payments are tax deductible for the payer, while voluntary spousal maintenance payments are not. Any maintenance payments in respect of children are not tax deductible for the payer. Such payments are treated the same way as if the taxpayer was providing for the child or children out of his or her after-tax income, which is in line with the tax treatment for all other parents, where the cost of maintaining their child or children is not tax deductible.
I have no current plans to amend or review the position.
Further information on the tax treatment of maintenance payments made between married persons or civil partners and qualifying co-habitants can be found in Tax and Duty Manual Parts 44-01-01 and 44B-01-01 respectively, both of which can be located using the links below:
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-44/44-01-01.pdf.
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-44b/44b-01-01.pdf.