I will shortly turn 66 and will be entitled to the old age contributory pension. Will my pension be taxed? Must I send in tax returns like I have done in the past? Also, do I have to declare some money I have in Post Office savings certificates?

Mr J.H., Kerry

The situation with income tax does not change simply by virtue of you having a pension. If your income in retirement exceeds the income tax threshold, you will be liable to income tax.

Assuming you have made sufficient social insurance payments during your working life to qualify for the maximum contributory old age pension, you would be entitled to a weekly payment of €179.30 under the rates set by the Department of Social and Family Affairs for 2005. That amounts to an annual income of €9,323.60.

By itself, this sum would not be enough to bring you into the income tax net. The exemption limit for this year for people aged 65 years or more is €16,500. If they are married, this limit doubles to €33,000.

Of course, there is nothing to stop you working in retirement while in receipt of the contributory old age pension, but there is still some considerable leeway between your likely pension payment and the income tax threshold.

The An Post savings certificates will not come into the reckoning when weighing up your liability to tax. Interest on these savings is specifically and expressly tax-free.

There is no necessity to submit a tax return annually, unless you are at or close to the threshold for tax liability.

Capital gains

I have two queries as to my property ownership in Ireland. Nine years ago, I purchased a new one-bedroom apartment in a new complex in Dublin, which I am now deciding to sell.

I am an American of Irish descent, born in New York of Irish-born parents. I have never worked in Ireland. I have never rented out this apartment as I used it as a vacation home for myself and family. I never stayed in Ireland for more than two months in any given year.

The Irish selling agent and lawyer that I engaged to sell the property tells me that I am responsible for a 20 per cent capital gains tax payment to the Irish government. Is this correct?

I also believe that I will have to pay capital gains tax to the American government - at what percentage rate I don't know. I feel that the profit that I made from this property is being taken away in taxes taken by both governments.

Mr T.H., New York

Your concern is understandable. While your initial acquisition was not necessarily made with a view to profiting from the venture, it would be a little rich to note that the only people making on the deal were the respective tax authorities.

However, I think you will find that things are not quite as bad as you fear. It is certainly the case that the Irish tax authorities will look to levy capital gains.

The website of the Revenue Commissioners states that: "Non-resident persons are chargeable to tax on gains made on the disposal of specified assets including: immovable property situated in the State, minerals or mineral rights in the State (including the Irish area of the Continental Shelf)" - that's a property to you or me.

The tax is levied at 20 per cent on the difference in the price paid for the property at the outset and the price you secure for it on its sale.

There are, however, certain mitigating factors. First, you can subtract any costs involved in acquiring and selling the property. Next, you can avail of "indexation", a Revenue multiplier designed to offset the effects of inflation, at least up to the end of 2002 when it was ended by the then-minister for finance, Charlie McCreevy.

Still, you can claim indexation from 1996 to 2002 on this property.

There is also a small exemption on the first €1,270 of any gain.

Better news is that there are specific provisions on capital gains in a double taxation agreement between the United States and Ireland. This 1997 accord, entitled Convention Between the Government of Ireland and Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, is designed specifically to ensure that people in your position do not face a double whammy from tax authorities in different jurisdictions.

Section 13 of the agreement states that where a citizen of one state has immovable property in the other state, that other state can levy capital gains tax on that asset.

If the asset is mobile, the citizen's home state has the taxing authority.

That would seem to indicate that you will not face a bill from the Internal Revenue Service over the sale of this property.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended to replace professional advice.