AVC Tax Relief - maximizing relief at 40%

A

Aislingob

Registered User
Messages
15
My tax liability across the two main tax bands for a sample year are €44,300 @ 20% (= €8,860) and €34,455 @ 40% (=€13,782)

Am I correct in understanding that for that sample tax year, the max I could have benefited at 40% with an AVC/PRSA contribution would have been €13,782? (Anything further would have been only allowed at 20%)

So, if I contributed say €20,000 to the AVC/PRSA, I would get 40% tax credit on €13,782 and 20% tax credit on the balance, €6,218?

Or is it €34,455 that is the amount I could contribute to get the max of the 40% relief so €34,455.11 @ 40% would have attracted a tax credit of €13,782.04 effectively writing off any liability at 40%

(... ignoring age related thresholds/risk of over-funding etc for the purposes of this illustration).

Many thanks.
 
Aislingob said:
Or is it €34,455 that is the amount I could contribute to get the max of the 40% relief so €34,455.11 @ 40% would have attracted a tax credit of €13,782.04 effectively writing off any liability at 40%

(... ignoring age related thresholds/risk of over-funding etc for the purposes of this illustration).
Click to expand...

This.
 
The % is either one or the other (on the whole AVC) 20% or 40%.
So if for argument sake (without counting your credits) your salary is of €44,300 + €34,455 =€78755 then you are in the higher rate (40%)
then depending on how much you invest (age related) , lets say 30.000, this amount is the one used for your 40%
 
Aislingob said:
My tax liability across the two main tax bands for a sample year are €44,300 @ 20% (= €8,860) and €34,455 @ 40% (=€13,782)

Am I correct in understanding that for that sample tax year, the max I could have benefited at 40% with an AVC/PRSA contribution would have been €13,782? (Anything further would have been only allowed at 20%)

So, if I contributed say €20,000 to the AVC/PRSA, I would get 40% tax credit on €13,782 and 20% tax credit on the balance, €6,218?

Or is it €34,455 that is the amount I could contribute to get the max of the 40% relief so €34,455.11 @ 40% would have attracted a tax credit of €13,782.04 effectively writing off any liability at 40%

(... ignoring age related thresholds/risk of over-funding etc for the purposes of this illustration).

Many thanks.
Click to expand...
You're overcomplicating it. The age related thresholds trump everything. You get the relief based on those, not what actual tax you paid.
 
Corola said:
That's not right. The AVC reduces your taxable earnings, so if it reduces it enough to fall into the lower bracket then some part of the relief would be at 20% and some at 40%.
Click to expand...
I actually did not know that! thanks... It is deducted from your salary before tax, I see now that could happen.
 
Aislingob said:
My tax liability across the two main tax bands for a sample year are €44,300 @ 20% (= €8,860) and €34,455 @ 40% (=€13,782)

Am I correct in understanding that for that sample tax year, the max I could have benefited at 40% with an AVC/PRSA contribution would have been €13,782? (Anything further would have been only allowed at 20%)

So, if I contributed say €20,000 to the AVC/PRSA, I would get 40% tax credit on €13,782 and 20% tax credit on the balance, €6,218?

Or is it €34,455 that is the amount I could contribute to get the max of the 40% relief so €34,455.11 @ 40% would have attracted a tax credit of €13,782.04 effectively writing off any liability at 40%

(... ignoring age related thresholds/risk of over-funding etc for the purposes of this illustration).

Many thanks.
Click to expand...
Ignoring the age related thresholds, your income tax would be recalculated based on your taxable income, which would now be 78755 - 20000 = 58755.
 
Corola said:
Only if you are over 60 because that is already 38% of your salary.
Click to expand...
Does it matter that sone of my income I list here is dividend income? Also, about €8,000 is my husbands part-time job ad he is mostly a stay-at-home dad.
 
Ruffian said:
In theory. But you have to factor in age-related limits and any other pension contributions you may have, eg, main scheme.
Click to expand...
Fir a public sector employee, how can I accurately calculate my pension contribution? The only concrete figure I have is the pension levy.
 
Aislingob said:
Does it matter that sone of my income I list here is dividend income?
Click to expand...
Your allowable percentage age related yearly pension relief only applies to earned income. (Your employment income)

But tax on dividends count as part of your 40% taxed income.

So for example, say you can make age related pension contributions of 20k.

You have 15k of marginal (taxed at 40%) earnings from your employment earnings.

You also have dividend income of 5k taxed at 40%.

Because your have total marginal income of 20k, you would get tax relief at 40% on all your pension contributions.
 
Last edited:
Aislingob said:
Also, about €8,000 is my husbands part-time job ad he is mostly a stay-at-home dad.
Click to expand...
Your husband's income does not count when you are calculating your percentage age related yearly pension relief.

Your husband would not get any tax relief if he was to make pension contributions. This is because his earnings are too low to take him into the tax net.
 
Last edited:
Aislingob said:
Fir a public sector employee, how can I accurately calculate my pension contribution? The only concrete figure I have is the pension levy.
Click to expand...

From your payslip add all your pension related deductions (whatever way it is set out) - main superann scheme, survivor pension, USC. Calculate what percentage this is of your gross pensionable pay on your payslip for the same period. Subtract this percentage figure from your age related percentage limit.
 
You must log in or register to reply here.
Back
Top