As announced in the Budget for 2017, individuals who are at least 61 years of age are allowed a tax rebate on their pension income. The proper tax due should be calculated as shown hereunder.
1. All income is first to be charged to tax at the normal tax rates applicable to the person concerned: single rates, parent rates or married rates.
2. As from basis year 2017, the resulting tax as per No 1 above is reduced by a tax rebate on pension income. (In the case of a person on married rates, a further rebate is also applicable on all income.)
The rebate is calculated as follows:
(i) Person on single rates: Tax rebate = (Pensions income less 9,100) X 15%
(ii) Person on parent rates: Tax rebate = (Pensions income less 10,500) X 15%
(iii) (a) Person on married rates: Tax rebate = (Pensions income less 12,700) X 15%
(iii) (b) Person on married rates: Further tax rebate = (all income less 12,700) X 15%, less rebate as per (iii)(a)
These rebates are subject to the following cappings:
| |
2017 |
2018 |
2019 |
|
(i)
single rates |
210 |
615 |
650 |
|
(ii)
parent rates |
150 |
405 |
440 |
|
(iii) (a) married rates |
45 |
75 |
110 |
|
(iii) (b) married rates (further rebate) |
75 |
150 |
150 |
3. The tax due by the pensioner is therefore the tax calculated as per No 1 above, less the rebate/rebates calculated as per No 2 above.
The cappings ensure that, for all pensioners, pension income in 2019 below €13,434 is not taxable (In 2018 below €13,200 not taxable).
Examples (basis 2017)
To allow pensions a tax rebate, specific tax rebates equivalent to the threshold mentioned above are being applied as shown in the following examples.
1. In the case of an individual who is chargeable to tax at the single rates, a tax rebate shall be allowed as a set off against the tax on his chargeable income, as follows:
Tax rebate = (pensions income less 9,100) multiplied by 15% (with a rebate capping of €210).
Example: Pension income €10,400 - €9100 =€1300 * 15% = €195
The tax rebate amounts to €195.
2. In the case of an individual who is chargeable to tax at the parent rates, a tax rebate shall be allowed as a set-off against the tax on his chargeable income, as follows:
Tax rebate = (pensions income less 10,500) multiplied by 15% (with a rebate capping of €150).
Example: Pension income €11,400 - €10,500 =€900 * 15% = €135
The tax rebate amounts to €135.
3. In the case of an individual who is chargeable to tax at the married rates, a tax rebate shall be allowed as a set-off against the tax on his chargeable income, as follows:
Tax rebate = (pensions income less 12,700) multiplied by 15% (with a rebate capping of €45).
Example: Pension income €13,000 - €12,700 =€300 * 15% = €45
The tax rebate amounts to €45.
If in this example taxpayer also earned a further €400 from another source not being a pension:
Tax rebate = (chargeable income less 12,700) multiplied by 15% less the rebate already granted (with a rebate capping of €75).
Example: Chargeable income €13,400 - €12,700 =€700 * 15% = €105
€105 less capping already granted (€45) = €60.
The additional tax rebate amounts to €60.
The total amount of tax rebate that this individual may claim is €105 (€45 + €60).