- Tax in the year of death
- Tax in the following years
- Tax exemption
- Tax on social welfare and other pensions
- Health Contribution
There are special arrangements for income tax in the year of death and there are various tax reliefs and allowances which are particularly relevant to bereaved people.
Tax in the year of death
There are specific rules about taxation in the year of death. There are extra credits for widowed parents in the years following the death.
Single/widowed person
In the year of death a single or widowed person gets the normal tax credits to which he/she is entitled for the whole year. This means that if a single or widowed person dies, a refund may be due and may be claimed by the personal representatives of the deceased. The refund becomes part of the deceased's estate.
Married couples
If the couple are jointly assessed for tax, then tax treatment in the year of death depends on which of the couple dies. One of the couple is regarded as the person responsible for paying the tax or 'assessable person'. The 'assessable person' is the one that the couple have nominated as such. If they have not made a nomination, then the assessable person is the higher income earner.
Death of assessable person
From the beginning of the tax year to the date of death: the couple may claim the full amount of the married tax credit and the employee credit if enough was earned (two employee credits if both were working).
From the date of death to the end of the tax year: the surviving spouse gets the special increased widowed person's tax credit (the same as the full married credit) and the employee credit (if eligible) and the single person's tax bands apply.
Death of non-assessable person
If you are the assessable person and your spouse dies, you are taxed in the normal way – you are taxable on your own income for the full year and on the income of your spouse up to the date of death. You are entitled to the normal tax credits including any employee credit to which your spouse may be entitled.
Tax in the following years
In the first tax year after the death and thereafter the widow or widower gets the Widowed Person's Tax Credit and the One-Parent Family Credit if eligible. The following extra credits are available to widowed people with dependent children for the five tax years following the death:
Widowed Parent's Credit
year of death €3,750
2nd year €3,250
3rd year €2,750
4th year €2,250
5th year €1,750
Tax exemption
If your income is less than the appropriate tax exemption limit, you are not liable for tax. If your income is slightly above the exemption limit you may get marginal relief. This means that you pay tax at 40% on the part of your income which is over the exemption limit.
There are tax exemption limits for people under 65 but they are now largely irrelevant.
The exemption limits for people aged 65 and over for the tax year 2007 are €19,000 for a single person and €38,000 for a married couple. There are extra amounts for dependent children.
Tax on social welfare and other pensions
Income tax is normally payable on all occupational pensions and on most social welfare payments and pensions. Some of the exceptions are Child Benefit, Jobseeker's Allowance, Disability Allowance and Family Income Supplement.
If your only income is a social welfare payment, you are unlikely to have to pay any income tax. If you have other income you may be liable for tax.
There is no mechanism for directly taxing social welfare payments so they are usually taxed by reducing the credits which would otherwise apply to your other income. If your income includes a taxable social welfare payment, then your tax credits are applied to this first. This is known as 'coding in'. The result is that your tax credits for your other income, for example, occupational pension or earnings, are reduced by the credit applied to your social welfare payment.
Health Contribution
The health contribution (2%) is payable by people whose income is above a certain level. There are some exceptions:
- Medical Card holders
- Recipients of widowed or single parent payments.
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