Steven Matthews (Wicklow, Green Party)
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194. To ask the Minister for Finance further to Parliamentary Question No. 181 of 2 July 2024, the position regarding the income threshold for the exemption limit to deposit interest retention tax (details supplied); if this can be reviewed to allow for greater flexibility for those that are marginally above that level of income; and if he will make a statement on the matter. [29432/24]

Jack Chambers (Dublin West, Fianna Fail)
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It is assumed that the Deputy is referring to the exemption from Deposit Interest Retention Tax (DIRT) for taxpayers aged 65 years or over, subject to certain exemption limits.

As the Deputy will be aware, where an individual is aged 65 years or over, and their total income does not exceed the annual exemption limit of €18,000, interest may be received without paying DIRT. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000 per annum.

Marginal relief is available in such situations where the individual’s income exceeds the exemption limit but is less than twice that amount. Where marginal relief applies the individual is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. The system of marginal relief ensures that in cases where an individual's income rises above the exemption threshold that their net income will not decline, as the 40% income tax rate only applies to the proportion of income above the threshold. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.

It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is entitled to the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands. In circumstances where the individual no longer benefits from the age exemption or marginal relief they will benefit from the increases to the main personal tax credits in recent Budgets.

The increases to the main personal tax credits in Budget 2024 (€100 increase to the single, employee and earned income credits and a €200 increase to the credit for married couples/civil partnerships) means that the effective entry point to income tax has increased for all taxpayers, including those aged over 65. From 2024, the effective entry point to income tax for an individual in receipt of the single person credit, employee/earned income credit and the age credit has increased by €1,000 per annum from €18,975 to €19,975 per annum.

The Deputy may be aware that the Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to income tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, at the following link- www.gov.ie/en/publication/7fbeb-report-of-the-commission/.

As part of the Personal Tax Review published last year, my Department set out further analysis of the recommendations of the Commission on Taxation and Welfare, including in respect of the age exemption limits. The Report is available at the following link - www.gov.ie/pdf/?file=https://assets.gov.ie/273335/96f70eb1-64e1-4f02-9096-e36f306a048b.pdf#page=null. As a result I have no plans to increase the age exemption limits at present.