Seeking Guidance on Future Tax Implications as a Widow

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ourwarehouse

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Hi everyone,

I'm seeking some guidance regarding my tax situation following my recent tax return. Here's a bit of background:

I used my late husband tax credits, which meant no income tax for me. However, I did have to pay the Universal Social Charge (USC).

Now, looking ahead, I'm wondering about the potential changes in my tax liability. For instance, if my taxable income remains at €18,140.5, and the calculation is €18,140.5 - 20% = €3,628.10 + USC, will I be liable for the 20% income tax in the next year?

I'd greatly appreciate any insights, advice, or shared experiences on how this might play out. Additionally, if there are any considerations or strategies I should be aware of as a widow.

Thanks a bunch for your help!

Best regards,
 
Quick answer here:-

Widowed Person’s Tax Credit
If you are a widowed person you can claim an increased personal tax credit. The amount of the tax credit depends on whether or not you have dependent children and when your spouse died.
So, assuming that you are a widowed person without dependent children you will still get the Married Person's Tax Credit in the year of death.
This is €3,550 in 2023 And in the years following the year of death, you will get the Widowed Person's (without dependent children) Tax Credit.
This is €2,315 in 2023.
A tax credit of €2,315 means that you will not have to pay any income tax until your taxable income exceeds €11,575.

So an income of €18,140 means that you will be liable to pay tax on €6,565 of your income. (At 20% the tax will be about €1,313).
You will also be liable for USC. I note that you didn't mention PRSI - are you exempt from paying it?

It's important to note that if you are aged over 65, then you could be eligible for marginal tax relief. That would involve you paying 40% tax on the amount of your income above €18,000, in your case that would be €140 * 40% = €56.

Full details can be found here: https://www.citizensinformation.ie/...me-tax-credits-and-reliefs-following-a-death/
 
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Marsupial said:
Quick answer here:-

Widowed Person’s Tax Credit
If you are a widowed person you can claim an increased personal tax credit. The amount of the tax credit depends on whether or not you have dependent children and when your spouse died.
So, assuming that you are a widowed person without dependent children you will still get the Married Person's Tax Credit in the year of death.
This is €3,550 in 2023 And in the years following the year of death, you will get the Widowed Person's (without dependent children) Tax Credit.
This is €2,315 in 2023.
A tax credit of €2,315 means that you will not have to pay any income tax until your taxable income exceeds €11,575.

So an income of €18,140 means that you will be liable to pay tax on €6,565 of your income. (At 20% the tax will be about €1,313).
You will also be liable for USC. I note that you didn't mention PRSI - are you exempt from paying it?

It's important to note that if you are aged over 65, then you could be eligible for marginal tax relief. That would involve you paying 40% tax on the amount of your income above €18,000, in your case that would be €140 * 40% = €56.

Full details can be found here: https://www.citizensinformation.ie/...me-tax-credits-and-reliefs-following-a-death/
Click to expand...
Or you could claim the Exemption Limit which means if your income is below €18,000 you have no PAYE liability.
 
@Marsupial Thank you for the response

- Widow, 64 years old, no PAYE salary, no dependent children
- Rental income: €7,800 under Rent a Room relief (considered tax-exempt) Not sure if it is part of overall Income Totaling!!
- Total income: without Rent a room €18,140.5 (widow's pension + Shop rental income)
- Income tax calculation: €18,140.5 - 20% = €3,628.10 liability
- Late husband's tax credit used to offset the gain
- No outstanding income tax for 2022, except for Universal Social Charge (USC)

Now I have read before that the first €11.575 was not taken into consideration when it came to overall income Tax calculations & I recall talking to an Accountant whereby he mentioned that the pension was not part of income tax calculation but I am confused where is the €18.140.5 figure coming from without the Pension, or is it simply no matter what, when your income goes above the €11.575 that €11.575 is then included?

So How would my potential 2023 return look like,

- Income breakdown:
No PAYE salary for 2023
  1. Widows pension €11575 + Shop Rental income after expenses: €6565
  2. Rent a Room relief: €7,800 (considered tax-exempt)
  3. New Warehouse Rental Income: €20,000 after expenses
  4. Total income excluding Rent a Room & Pension: €26,565
  5. 20% income tax calculation: €26,565 - 20% = €5,313
  6. Income after deduction: €26,565 - €5,313 = €21,252
  7. Widowed Person's Tax Credit: €2,315
  8. Adjusted taxable income: €21,252 + €2,315 = €23,567
  9. Universal Social Charge (USC) to be calculated

Does the widows Tax credit always stay at €2.315 or does it regress over a 5 year period & on the 5th year is it not €1800

Finally, when you say over 65 @Conan can you elaborate, are you saying everything above €18000 is Taxed at 40% how? I taught the threshold for 40% Tax rate was above €42000

I hope I am making sense, Thank you for the links.
 
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OK so dealing with your 2023 tax return and using the figures provided by you:-

Widow's pension (this is taxable - but see *note below) plus shop rental income (net): €18,140.
New Warehouse Rental Income (net): €20,000

Rent a room is tax exempt (up to 14K a year) so I'm excluding it.

Your total taxable income is €38,140 - this all falls into the lower tax band so is taxable at 20%

Total tax payable is €7,628.
Your total tax credit is €4,335 [widow's credit €2,315 plus age credit €245 (because you will turn 65 next year) plus employee tax credit €1,775]
So net tax payable is €3,293 (USC to be calculated)

* I assume that you are receiving the Widow's Contributory pension, in which case Social Welfare will notify Revenue that you are receiving it and Revenue will reduce your yearly tax credits to reflect the value of this pension.

Note that your widow's tax credit will not reduce over the next 5 years because you have no dependent children.

Finally, given that your predicted income includes the €20,000 rent from the new warehouse, there isn't any point in examining the marginal tax issue.
 
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Surely somebody gets the personal tax credit, as well as the widows tax credits, as well as any possible PAYE tax credit?
 
She has no PAYE income to get the PAYE Tax Credit for.
Rental Income is not 'Earned'.
 
Can I ask the Widowed Person’s Tax Credit is that only for 5 years or can it last much longer until you happen to cohabiting or remarried again?
 
Towger said:
She has no PAYE income to get the PAYE Tax Credit for.
Rental Income is not 'Earned'.
Click to expand...
Employee tax credit is available where the taxpayer has DSP income.
Widowed person tax credit is the personal tax credit for a widowed person, as opposed to single or married tax credit.
Widowed parent tax credit is additional where there are dependent children.

Personal Tax Credit

This page details that you are due a Personal Tax Credit if you are resident in Ireland
www.revenue.ie www.revenue.ie
 
irbx said:
Can I ask the Widowed Person’s Tax Credit is that only for 5 years or can it last much longer until you happen to cohabiting or remarried again?
Click to expand...

It lasts for as long as one remains a widow. Cohabitation doesn't change that status (although that may change after the promised referendum next year), but it stops following remarriage or entering into a civil partnership.

As mentioned above there is a separate tax credit called "widowed parent tax credit" which lasts for 5 years.

Widowed Parent Tax Credit

Widowed Parent Tax Credit can be claimed if you are a widowed person or a surviving civil partner
www.revenue.ie www.revenue.ie
 
@Marsupial First Class, really!

Your insights are incredibly helpful.

1. Regarding the Widow's tax credit, I appreciate the clarification that it won't reduce over the next 5 years due to the absence of dependent children. That's good to know.

Once again, thank you.
 
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