Revenue Note for Guidance

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Revenue Note for Guidance

188 Age exemption and associated marginal relief

Summary

This section provides for increased exemption limits for individuals aged 65 or over. For certain married individuals/civil partners, where either spouse/civil partner is aged 65 or over at any time during the tax year, the exemption limit is €36,000. In the case of single persons, widowed persons, married persons or civil partners assessed as single persons who at any time during the tax year are aged 65 or over, the exemption limit is €18,000. 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 exemption limit.

Details

Definitions

(1) “income tax payable” has the same meaning as in section 3, but without regard to any reduction of tax under section 244.

“total income” for the purpose of this section means total income from all sources as estimated in accordance with the Income Tax Acts, including income arising outside the State which is not chargeable to tax.

Exemption limits

(2) In the case of an individual assessed to tax under section 1017 or 1031C i.e. joint assessment/aggregation, where either spouse/civil partner during the year of assessment is aged 65 or over the exemption limit is €36,000. In the case of a single person, a widowed person, a married person or a civil partner assessed as a single person who is 65 or over, the exemption limit is €18,000. The exemption limit is known as the “specified amount”.

Additional amount for children

(2A) Where an individual proves that he/she has living, at any time during the year of assessment, a qualifying child, the exemption limit is increased by €575 in respect of each of the first 2 qualifying children and by €830 in respect of each subsequent qualifying child. Any question as to whether a child is a qualifying child is determined in the same manner as it would be for the purposes of section 462B (single person child carer credit).

Joint entitlement to additional amount for a child

(2B) Where 2 or more individuals would be entitled to an increase in the specified amount in respect of the same child —

  • only one increase is allowed per child,
  • where the child is maintained by one individual only, that individual only is entitled to the increase,
  • where the child is maintained by more than one individual, each individual is entitled to claim such part of the increase as is proportionate to the amount expended by him/her in relation to the total amount expended by all individuals towards the maintenance of the child, and
  • in ascertaining, for the purposes of entitlement to the additional allowance, whether an individual maintains a child, any payments made by him/her towards the maintenance of the child which he/she is entitled to deduct in computing his/her total income for the purposes of the Income Tax Acts is deemed not to be a payment towards the maintenance of the child.

Application

(3) This section applies for any year of assessment to an individual who makes a return of his/her total income on the appropriate form and proves that at some time during the year of assessment that he/she, or in the case of a married couple/civil partnership entitled to the married person’s tax credit under section 461 either spouse or civil partner, is aged 65 or over.

Exemption from tax

(4) Where an individual to whom this section applies proves that his/her total income for a year of assessment does not exceed the appropriate exemption limit for that year, that individual is exempt from income tax.

Marginal relief

(5) Where an individual to whom this section applies proves that his/her total income for any year of assessment does not exceed a sum equal to twice the exemption limit applicable to that individual for that year, the amount of tax payable by that individual is limited to 40 per cent of the amount by which the individual’s total income exceeds the exemption limit applicable to that individual.

Miscellaneous

(6) Sections 459 and 460, which provide rules relating to allowances, deductions and reliefs and to the repayment of tax, where appropriate, are applied for the purposes of any exemption from tax or repayment of tax under this section.

Relevant Date: Finance Act 2021