Kevin O'Keeffe (Cork East, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

109. To ask the Minister for Finance his plans to enable a retired person to claim a tax credit for their spouse that is not receiving a pension in their own right. [28097/18]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The State pension, including an increase for a qualifying adult dependent, is chargeable to income tax. Where an individual is entitled to the State pension and such pension is increased by virtue of that individual having a qualifying adult dependant, it remains one pension for tax purposes.

This position was not changed by Finance (No.2) Act 2013, which inserted Section 126(2B) into the Taxes Consolidation Act 1997 in order to re-affirm the position that any such increase is treated as the income of the person who qualifies for the pension.  Entitlement to the State pension and any associated adult dependant allowance is based on PRSI contributions made by an individual and it is the choice of the individual pensioner whether to claim an increase for an adult dependant.  The relevant income is therefore classed as that individual’s income solely, notwithstanding the fact that the dependant element of the pension may be paid directly to the qualifying dependant.

With regard to the taxation of the State pension in general, I would note that all social welfare payments are exempt from USC.  Furthermore, a pensioner with an adult dependent that is solely in receipt of the State Contributory Pension, payable at the maximum rate, would in fact have no liability to income tax or USC at all, as the available income tax credits, including the Age Credit available to individuals aged 65 and over, would be sufficient to shelter the income from taxation.

There are therefore no plans to change this position.  I would however note that the changes to the income tax system included in Budget 2018 mean that individuals who paid income tax and/or USC in 2017 will see a reduction in their tax bill in 2018 where incomes are equal. This is the fourth Budget in succession in which income tax reductions have been introduced, focussed particularly on low to middle-income earners.