Is there any relief from USC for pensioner couple?
Q&A:My wife and I are in our late sixties. Our only source of income is my public service pension which is subject to the universal social charge. Could you indicate the circumstances in which exemptions are granted to this charge?
Mr W. K., Dublin
There are very clearly defined circumstances in which the universal social charge is waived. These relate mostly to social welfare payments but not uniquely so.
The most straightforward exemption to the charge is for those people whose income is below the USC threshold of €10,036 annually.
The good news is that this 2012 threshold is a significant increase on the €4,004 applicable last year. However, it is still not likely to cover people in receipt of most occupational pensions.
You will also not be troubled by the charge on any income received from the Department of Social Protection – ie welfare payments.
While that would include the State pension, it would not apply to a public service pension of the sort that you outline.
Payments made in lieu of social welfare, such as community employment schemes, are also exempt from the charge.
Finally, you will not pay the charge on bank interest to which Deposit Interest Retention Tax has already been applied.
This is in line with the general position that DIRT is the only deduction to interest income on savings.
Finally, there is a list of “exempt income” in the legislation.
This includes, but is not confined to, certain foreign pensions and things as regular as rent a room relief. Scholarship income and income from savings certificates are other examples under this category. More particularly, the list also includes expenses of members of the judiciary and the foreign service allowance for State employees. The full list can be found at iti.ms/LLdrwV.
Essentially, as you can see, the exemptions are generally fairly tightly defined.
More importantly, once you exceed the income threshold, all income is subject to the charge – including that under the €10,036 threshold.
You will pay 2 per cent on that first €10,036 of qualifying income, assuming your income exceeds this level.
As you are in your sixties, you will pay 4 per cent on the next €5,980 above that threshold and 7 per cent on anything in excess of that – unless you have a full medical card.
If you do have a full medical card then you will secure the same reliefs that apply to people over the age of 70 – ie you will no longer be liable to that 7 per cent rate, with 4 per cent being your maximum exposure to the charge.
Exemption on ‘small gifts’ keeps on giving €3,000
In your response to a question last month, you said parents can “gift” each of their children €3,000 a year. Is there a limit on this? Can it go on for 30-40 years? Can an aunt “gift” a nephew in the same way?