Jennifer Whitmore (Wicklow, Social Democrats)
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368. To ask the Minister for Finance his views on the fact that while the DIRT exemption limit of €18,000 for over 65s has not changed for a number of years, increases in the State pension mean that it is increasingly difficult for pensioners to stay under that limit if they have any additional income at all; if he will consider increasing this limit; and if he will make a statement on the matter. [55388/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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Interest may be received without paying Deposit Interest Retention Tax (“DIRT”) in certain circumstances. Where an individual, or their spouse/civil partner, is aged over 65 and their total income, including gross deposit interest does not exceed the annual exemption limit, as provided for in section 188 Taxes Consolidation Act (TCA), their deposit interest earnings are exempt from DIRT.

This exemption is automatic on the submission of a declaration to the financial institution where the account is held. To qualify for the automatic exemption, the individual must declare on a Form DE1 that they or their spouse or civil partner are aged 65 years or over during the year and that their total annual income does not exceed the exemption limit. As the Deputy is aware, the current exemption limit is €18,000 in the case of a single person and €36,000 in the case of a married couple or civil partners. The relevant income thresholds may be increased further if the individual has a qualifying child.

Further information on the DIRT exemption, including how to claim it, is available on the Revenue website at: .

Further information on the age exemption, including information on the current exemption limits, is available on the Revenue website at: .

It is important to note that marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies the individual or couple is taxed at 40 per cent 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 or couple’s income rises above the exemption threshold that their net income will not decline, as the 40 per cent 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 between the use of marginal relief or the normal tax system of credits and bands. In circumstances where the individual or couple 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.

With the substantial increases to tax credits in recent Budgets, the effective entry point to income tax has increased for all taxpayers, including those aged 65 or older. Depending on their personal circumstances, it may be more beneficial for persons aged over 65 to be taxed under the normal tax system of credits and bands.

The current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. In addition to the age exemption, the age tax credit is available to persons aged 65 or over, and reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less per annum. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or Pay Related Social Insurance. The Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to income tax and USC as it narrows the base and breaches the concept of horizontal 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/.

Finally, as part of the Personal Tax Review published on Budget Day 2023, 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=. As a result, I have no plans to increase the age exemption limits at present.