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Tax Code.

Dáil Éireann Debate, Wednesday - 14 December 2005

Wednesday, 14 December 2005

Ceisteanna (165)

Pat Breen

Ceist:

177 Mr. P. Breen asked the Minister for Finance the tax relief or other incentives available for widows and widowers aged under 66 on the non-contributory pension who wish to return to work; and if he will make a statement on the matter. [39489/05]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Minister for Finance)

I am informed by the Revenue Commissioners that there are no specific tax reliefs directed at widows or widowers under the age of 66 years on a non-contributory pension returning to work. However, the following tax credits and bands are available to widowed persons.

The values in brackets are those which will apply for 2006 and subsequent years. In the year of bereavement a widowed person may receive a personal tax credit of €3,160-€3,260, which is equivalent in value to the married person's tax credit. For widowed persons with no dependent children, a tax credit of €400-€500, which is additional to the basic personal tax credit, is available after the year of bereavement. Such widowed persons would therefore receive aggregate tax credits of €1,980-€2,130 — comprising €400-€500 — plus the personal tax credit of €1,580-€1,630. The employee PAYE tax credit of €1,270-€1,490 may also apply as appropriate.

The non-contributory widows or widowers pension is paid by the Department of Social and Family Affairs and, in common with most other social welfare payments, is taxable. As such, circumstances could arise where the above tax credits would be reduced to cover the tax due on the pension and the net tax credits would then be available against the employment or other income of the individual. Following the year of bereavement, a widowed parent with a qualifying child or children may qualify for the one parent family tax credit of €1,580-€1,630, in addition to the personal tax credit of €1,580-€1,630.

A further tax credit, the widowed parent tax credit, is available on a sliding scale for the first five tax years following the year of bereavement as follows:

2005

2006

Year 1

2,800

3,100

Year 2

2,300

2,600

Year 3

1,800

2,100

Year 4

1,300

1,600

Year 5

800

1,100

Therefore, in the first year following bereavement a widowed parent is entitled to aggregate tax credits of €5,960-€6,360 — comprising a single personal credit of €1,580- €1,630 — a one parent family credit of €1,580-€1,630 and a widowed parent credit of €2,800-€3,100. The employee PAYE tax credit of €1,270-€1,490 may also apply as appropriate.

The tax rate bands applicable to widowed persons are:

2005

2006

Widowed (without dependent children)

€29,400 @ 20%

€32,000 @ 20%

Balance @ 42%

Balance @ 42%

Widowed (qualifying for one parent family tax credit)

€33,400 @ 20%

€36,000 @ 20%

Balance @ 42%

Balance @ 42%

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