Your money - 7 March 2012
Q. My query relates to USC and Income Tax. My income is €20,000 and I am liable for USC at 4% (I am over 70). Is my income for tax purposes €20,000 or €19,200 (i.e. income €20,000 less USC of €800)?
If I am liable on the €20,000 is there a question of double taxation here?
A. Unfortunately your income for tax purposes is €20,000.
The income tax rates and USC rates apply separately to your gross income. If the State Contributory Pension or other state pension forms part of your income of €20,000 then this is not liable to the USC. In addition if you have included any deposit interest which is subject to DIRT in the amount of €20,000 this likewise is not liable to the USC.
As you may be aware there is an exemption limit for income tax purposes for individuals aged 65 years or over. The current limits are as follows:
Single Widowed or Surviving Civil Partner €18,000
Married or in Civil Partnership €36,000
As your total income is slightly above the €18,000 limit you would be entitled to marginal relief giving you a maximum tax liability in the year of €800. This is calculated:
|Taxable €2,000 at marginal rate 40%||800|
In the event that your tax credits would give a more favourable result the tax office will collect the amount which is most beneficial to you.
Q. In August 2011 I received a cash gift of €165,000 from my parents. They wish to give me a further gift this year. How much can I receive and still stay within the Group A tax threshold.
A. With effect from 6 December 2011 (Budget Day) the Class A threshold in respect of gifts and inheritances between parents and children was reduced to €250,000.
Based on the amount you have already received, and assuming that you have not received any previous gifts from your parents, then the maximum you may take at this point without incurring a tax liability amounts to €85,000.
You should also be aware that if your parents make a further gift to you of the €85,000 you are obliged to make a return for CAT purposes under the self-assessment regulations as the amount received will have exceeded 80% of the relevant class threshold.
Any amounts over and above the class threshold are now subject to tax at a rate of 30%.
The current class thresholds are:
|Class A*||Class B*||Class C*|
|2011 (from 8 Dec 10)||€332,084||€33,208||€16,604|
|2012 (from 6 Dec 11)||€250,000||€33,208||€16,604|
|Group||Relationship to Disponer|
|C||Relationship other than Group A or B|
Finally, the first €3,000 of the total value of all gifts received from any one disponer in any year to 31 December is exempt.
Both of your parents can therefore gift €3,000 to you each year tax free.
Q. I am a retired shop worker living on the Contributory O ld Age pension.
I have €4,500 saved at home and I want to put €3,500 into P ost Office savings certs and €1,000 into prize bonds. A friend told me I would lose my medical card if I do. Is that true?
A. Normally, your total income is taken into account in the means test for the medical card. There are different guidelines for those aged under 70 years and those aged over 70 years. Any cash, savings, investments or property (except your own home) is also taken into account. However, there are certain exceptions.
According to the HSE’s guidelines, if your income is derived solely from Social Welfare allowances or benefits or HSE allowances you should be granted a medical card even through your payment is in excess of the Income Guidelines for your age and situation.
The assessment of a couple for medical card purposes is based on the age of the older person.
All capital (savings and investments) is taken into account for medical card purposes. However, income earned on the savings/investments or property of €36,000 for a single person and €72,000 for a couple is disregarded. As your savings are lower than €36,000 then you need not worry about losing your medical card.
For others, the balance of savings etc. is taken into account either by taking the actual rate of interest received, if you provide a certificate of the interest paid on in the last full calendar year or by using a notional rate. The HSE will use whichever calculation is better for the applicant.
In essence, only the interest or income earned on savings and similar investments will be counted as income, not the total value of the savings or investments themselves.
Notional assessment of interest
|Capital||Weekly means assessed|
|First €36,000 (single), €72,000 (couple)||Nil|
|Next €10,000|| €1 per €1,000
|Next €10,000||€2 per €1,000|
|Balance||€4 per €1,000|
In the case of fixed-term or long-term savings products, where the interest is only applied at the end of a fixed period, if you wish, the HSE will only take account of the interest earned on the date investment matures. The calculation of interest includes Deposit Interest Retention Tax. Again, the HSE can apply the notional rate if the applicant wishes.
Property (other than the family home)
Where land/buildings are leased to another person, the income to be assessed will be the gross income, less any cost necessarily incurred associated with the property and such cost may include insurance premiums, loan/mortgage repayments, maintenance etc.
Where land/building, which are not being used but are capable of being leased or sold then the following assessment options can be used, with the more beneficial option applying to the applicant:
• Notional assessment of the rental/lease “going rate” for the area
• Assessment of capital value as in the table for capital, above.
Over 70s: Guidelines on income and capital
Between 2001 and 2008, everyone aged over 70 was entitled to a medical card without a means test. After that, a means test was introduced, with effect from January 2009.
Since January 2009 there are gross income limits of €700 per week for a single person and €1,400 per week for a married or cohabiting couple. There will be no standard deductions allowable (for example, for income tax).
However, if your income is over these limits you can still apply for the ordinary medical card or GP Visit Card: for example, if you have high medical expenses, such as paying for a nursing home.
Pensions, earnings, interest from capital and all other sources of income are included in the means test.