IT8 - Income Tax Exemption & Marginal Relief

Who can claim Exemption?

A person, aged 65 or over, is exempt from income tax where their total income is less than the following amounts:

 

Exemption limits and marginal relief for years 2010-2014
Years Single/Widowed or surviving civil partner Married or in a Civil Partnership
2010 €20,000 €40,000
2011-2014 €18,000 €36,000

These exemption limits are increased by €575 for each of the first two children and by €830 for each subsequent child.

Weekly and monthly breakdown of figures
Age 65 and over*, Single, Widowed or surviving Civil Partner
Weekly Monthly
No qualifying children €347 €1,500
1 qualifying child €358 €1,548
2 qualifying children €369 €1,596
3 qualifying children** €385 €1,665
Increase in the weekly, monthly tax exemption income limits
Age 65 and over*, Married or in a Civil Partnership
Weekly Monthly
No qualifying children €693 €3,000
1 qualifying child €704 €3,048
2 qualifying children €715 €3,096
3 qualifying children** €730 €3,165

* Age:

If you are married or in a civil partnership, it is the older spouse's or civil partner's age that is relevant e.g. you are 67 and your spouse or civil partner is 63, you are entitled to the married person's or civil partner’s exemption limits.

** Children: If you have more than 3 qualifying children, add €15.96 to the weekly figure (or €69.16 to the monthly figure) for each subsequent child.

A Qualifying Child is a child of the claimant:

  • born in the year,
  • is under 18 years of age at the commencement of the year,
  • if over 18 years at the commencement of the year and is in receipt of full-time instruction, or training full-time for a trade or profession for a period not less than two years,
  • incapacitated either physically or mentally, having become so before reaching 21 years of age or after the age of 21 but while still in receipt of full-time instruction, or while training full-time for a trade or profession for a period of not less than 2 years.

A child who is a child of the claimant, spouse or civil partner or not being such a child is in the custody of the claimant and is maintained by the claimant at the claimants own expense for the whole or greater part of the tax year. Where the child was born during the year, the claim is by reference to the greater part of the period from date of birth to the end of that tax year.

How is Exemption granted?

If your total income is less than your relevant exemption limit set out in the chart above, you will not pay any income tax. A Tax Credit Certificate will issue to your employer or pension provider showing the exemption figure so that income tax will not be deducted from your salary or pension. If you have been granted exemption, there will be no additional relief due on any further claims you might have e.g. Health expenses, etc.

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How do I calculate my Total Income?

Total income for exemption purposes is your gross income (i.e. before any income tax is deducted) from all sources less certain deductions, such as expenses, covenanted amounts,etc. Your income from all sources must be included when claiming income tax exemption i.e. salary, pension, rental income, deposit interest, dividend income, etc.

If married or in a civil partnership and jointly taxed, your spouse's or civil partner's income is also included. Gross figures (i.e. before deduction of DIRT, Dividend Withholding Tax, etc.) must be included for deposit interest and dividend income. If the total income for you and your spouse or civil partner is equal to or less than the exemption limit you are exempt from income tax.

Example:

A couple in a marriage or in a civil partnership (both over 65) have income of €35,000 in 2014. They will be exempt from tax for 2014 because their gross income of €35,000 is less than the exemption limit of €36,000.

Exemption applies to income tax only. PRSI continues to be payable.

An individual’s income may also be subject to the Universal Social Charge which is calculated separately from Income Tax. For information regarding exemption from the Universal Social Charge, please see pdfUniversal Social Charge FAQs (PDF, 674KB)

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If my income is slightly above the Exemption Limit, do I get any relief?

Yes. If your total income is over the exemption limit that applies to you, you may still qualify for some relief. This is called Marginal Relief.

If your income is up to twice the amount of the relevant exemption limit you may be entitled to marginal relief, however it will only be given where it is more beneficial to you than your tax credits. If you have been given marginal relief and subsequently wish to claim any additional tax credits or reliefs e.g. Health Expenses, Revenue will recalculate your liability to examine which is more beneficial to you - tax credits or marginal relief.

The Marginal Relief tax rate is 40%.

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How does Marginal Relief work?

The following example shows how Marginal Relief works.

Example

An individual in a marriage or in a civil partnership, aged 68 years, with 2 qualifying children has income of €38,000 (€730.77 per week) in 2014, is entitled to a total tax credit of €5,440 which is made up of the following:

Personal Tax Credit €3,300

PAYE Tax Credit €1,650

Age Tax Credit € 490

Total Tax Credits €5,440

The exemption limit that applies is €37,150 (i.e. €36,000 + €575 + €575 for 2 qualifying children).

Taxed under Normal System (20%)

Total Income: €38,000

Tax @ 20% - €7,600: Less tax credits - €5,440

Tax liability: € 2,160

Taxed under Marginal Relief (40%)

Total Income: €38,000

Less: Exemption - €37,150: Excess - €850

Tax liability: 850 @ 40% - €340.

In this example, it is more favourable to be granted Marginal Relief as the tax due is less than that which arises using the tax credits.

Once Marginal Relief has been allowed you and your employer or pension provider should receive a Tax Credit Certificate which will show that you have been granted the relief.

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Am I exempt from Deposit Interest Retention Tax (DIRT)?

You can apply directly to your Financial Institution to have the interest paid without deduction of DIRT where you satisfy the following conditions,

  • you, your spouse or civil partner are aged 65 or over during the tax year, or are permanently incapacitated by physical or mental infirmity from maintaining yourself
    and
  • your, your spouse's or civil partner's total income for the year will be below the relevant annual exemption limit.

Please see information leaflets:

Can I claim a Refund of Income Tax Deducted?

If you are entitled to exemption from income tax but have actually paid tax or received income from which tax was deducted (e.g. salary, pension, deposit interest (where the conditions outlined in the above paragraph are satisfied), Irish dividends, income under a covenant, etc.) you will be entitled to a refund in most cases. All claims must be made within a 4 year time limit i.e claims for the tax year 2010 may be submitted up to 31/12/14.

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How can I claim Exemption or Marginal Relief?

If you were granted exemption last year there is no need to reapply. Exemption will be automatically granted this year, if due.

If you think you are entitled to the Income Tax Exemption or Marginal Relief, you can telephone your Revenue LoCall service.

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Employment Support - Family Income Supplement - FIS

FIS is a weekly tax-free payment, paid by the Department of Social Protection, to help your family if your income falls below a certain limit (one-parent families can also qualify). To qualify, you must be in paid full-time employment that is expected to last for 3 months, work a minimum of 19 hours per week (or 38 hours per fortnight) and have at least one qualifying child. For further Social Protection information and application forms please contact your local Social Protection office, or

Department of Social Protection,
Family Income Supplement Section,
Government Buildings,
Ballinalee Road,
Longford.
Telephone: LoCall 1890 927 770, or (043) 334 0000 or (01) 704 3000 or LoCall 1890 92 77 70

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Time Limit for Repayment claims

A claim for repayment of tax must be made within 4 years after the end of the tax year to which the claim relates.

Accessibility: If you are a person with a disability and require this leaflet in an alternative format the Revenue Access Officer can be contacted at: accessofficer@revenue.ie

Further Information

This leaflet is for general information only. For further information, phone your Revenue LoCall service.

If you are calling from outside the Republic of Ireland, please phone + 353 1 702 3011.

Revenue Commissioners: July 2014


pdfPDF Version of IT8 - Income Tax Exemption & Marginal Relief for 2011 (PDF, 885KB)


This leaflet is intended to describe the subject in general terms. As such, it does not attempt to cover every issue which may arise in relation to the subject. It does not purport to be a legal interpretation of the statutory provisions and consequently, responsibility cannot be accepted for any liability incurred or loss suffered as a result of relying on any matter published herein.

(Adobe Acrobat Reader PDFExternal link)

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