As a non-resident couple can we avail of the married tax allowance on rental income earned here?
Property Clinic: Your queries answered
If an individual is resident in another EU member state and their Irish income is equal to at least 75 per cent of their total worldwide income, full tax credits and deductions should be available
My wife and I are non-resident and own two rented apartments in Dublin. As the combined rental income is over €47,000, this puts part of the income in the 40 per cent tax bracket. As we are married and jointly own the properties, are we entitled to avail of the married allowance in calculating Irish tax?
In general, an individual who is not resident in Ireland is not entitled to any of the allowances, deductions, reliefs or reductions allowed in ascertaining their Irish taxable income. However, there are some exceptions.
Where a non-resident individual is liable to Irish income tax on some/all of his or her income, it is necessary to determine whether the individual is eligible to claim some/all of the relevant allowances, deductions, reliefs or reductions that would be available if the individual was tax resident in Ireland.
For example, if an individual is resident in another EU member state and their Irish income is equal to at least 75 per cent of their total worldwide income, full tax credits and deductions should be available. However, where a non-Irish resident individual is not entitled to full tax credits, deductions or allowances, they may be eligible to a portion of these based on the percentage of their Irish taxable income over their worldwide income. In addition to EU member state residents, some of Ireland’s double taxation agreements provide that residents and/or nationals of our DTA partner countries are entitled to personal tax credits and reliefs.
In respect of the tax year ended December 31st, 2018, and 2019, a single person’s tax credit is €1,650 and a married couple’s tax credit is €3,300. Also, an individual can earn up to a certain limit (a “rate band”) which will be taxed at the standard rate of income tax regardless of their country of residence. This is currently 20per cent. Any income above this limit is taxed at the higher rate of income tax, currently 40per cent.
For the current tax year, a single assessed person is entitled to a tax-rate band of €35,300 while the standard rate cut-off point for a jointly-assessed married couple with one income is €44,300 and with two incomes is up to €70,600. This increase is limited to the lower of €26,300 or the amount of income of the spouse or civil partner with the lower income.
Under joint assessment you are chargeable to tax on your combined total income. Joint assessment allows you to allocate (transfer between you) most of your tax credits, reliefs and rate band with your spouse or civil partner. However, there are certain credits, reliefs etc that cannot be transferred including the employee tax credit, employment expenses and the increase in the standard rate band.
Susan Blake, tax manager, RSM Ireland, www.rsm.global/ireland