Martin Kenny
Question:231. Deputy Martin Kenny asked the Minister for Finance if he will consider increasing the age tax credit in Budget 2025; and if he will make a statement on the matter. [18989/24]
View answerTuesday, 30 April 2024
Questions (231)
Written answers
The position is that the tax code provides for a number of tax measures for those aged 65 and over. This includes section 464 Taxes Consolidation Act 1997 which provides for the Age Tax Credit for individuals aged 65 or over. The credit is due in the year that an individual reaches the age of 65 and is granted for the full tax year. The current value of the tax credit is €245 per year for single persons or €490 per year for married couples or civil partners. The credit is available when the older spouse or civil partner reaches the age of 65.
I have no current plans to increase the Age Tax Credit further. However, it is important to take into account that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. For example, the current age exemptions limits mean that single, widowed or surviving civil partners aged 65 or older do not pay any income tax if they earn less than €18,000 per annum, with a threshold of €36,000 in place for a married couple or civil partners where one person is 65 years of age or older. The relevant income thresholds may be increased further if the individual has a qualifying child.
Marginal relief may also 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 per cent on all income above the exemption limit to a ceiling of twice the exemption limit. The system of marginal relief ensures that in cases where an individual's or couple’s income rises above the exemption threshold that their net income will not decline, as the 40 per cent income tax rate only applies to the proportion of income above the threshold. 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 that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is entitled to the benefit of the more favourable treatment of either the use of marginal relief or the normal tax system of credits and bands.
Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 per annum or less. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are excluded from the calculation when determining whether an individual’s total income has exceeded the €60,000 per annum threshold. It is also worth pointing out that the State Contributory and Non-Contributory Pensions are not chargeable to USC or Pay Related Social Insurance.
Further details of the tax related support available for persons aged 65 and over can be located on Revenue’s website at the following link - www.revenue.ie/en/life-events-and-personal-circumstances/older-persons/index.aspx
Finally, it should be noted that the Commission on Taxation and Welfare recently reviewed the tax system in the round. The Commission recommended that age should be removed as a factor for determining the charge to income tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, located at the following link - www.gov.ie/en/publication/7fbeb-report-of-the-commission/.