Married couple - separate or joint assessment better?

A

aamqs

Guest
Hi,

I earn ~ €70K. My wife earned ~ €15K for a one off contract this year.

Currently we are jointly assessed. Given that her earnings for the year are ~ 15K, would we be better off being separately assessed, as she would be outside the tax net with those earnings?

My understanding if we are jointly assessed is that her earnings will be added on top of mine, and taxed at 41 %.

Any info would be greatly appreciated.
 
Your understanding is wrong. Your spouse is entitled under "individualisation" to earn a certain amount at 20% in her own right. For 2009 that amount is up to €27,400. FOr more information see here
 
Thanks for that.

Is there any way of avoiding tax on the 15K? (And to clarify - I mean any legal way - tax avoidance rather than evasion.)
 
aamqs said:
Thanks for that.

Is there any way of avoiding tax on the 15K? (And to clarify - I mean any legal way - tax avoidance rather than evasion.)
Click to expand...

Under separate assessment your wife will not pay tax on 15k as her tax credits amount to 18,300k
 
Graham_07 said:
Absolutely.......tell her to give up work. :rolleyes:
Click to expand...

Err... I think that would also eliminate the 15K !!

allthedoyles said:
Under separate assessment your wife will not pay tax on 15k as her tax credits amount to 18,300k
Click to expand...

Ok, so does that mean that separate assessment is the way to go? Graham_07's first post seemed to indicate that she would be taxed @ 20% if we were jointly assessed (I had thought it was at my marginal rate).

Would seperate assessment remove the tax liability totally?
 
It makes no difference under most cases - why would the revenue make it that easy to reduce your tax bill.

But the best way to check this out is to just download the ROS Offline Application from www.ros.ie and fill in a sample form 11 under each scenario.
 
if you are jointly assessed you can transfer tax credits with the exception of paye credit. if seperately assessed then transfer is not allowed. so if your wife does not use credits then you can not avail of them. also, 20% tax band is increased if two spouses are working and you may avail of this.
 
You presently probably have a married tax credit of €3,660. You each also ( unless you are proprietory directors or your wife's one-off contract was on a self-employed basis) may have PAYE credits of €1,830 . The PAYE credits are non-transferable. If ( as often happens on joint assessment especially if the other spouse has not had regular employment), you presently have both personal credits and your own PAYE credit then for your wife to have her earnings totally covered would require her to have her own PAYE credit AND her half of the married credit which means she gets €1,830 extra, giving her €3,660 which covers earnings of €18,300 as allthedoyles mentioned. However that moving of the €1,830 to her comes from you so you pay €1,830 extra.

For what it is worth, you cannot now backdate a claim for separate assessment for 2008 as it is too late. Claims must be made within 6 months of 01 April of the year of assessment. Remember also under separate assessment any unused credits or standard rate band may be transferred to the other spouse ( within allowed limits ) on a year end review as tax assessed under separate assessment cannot exceed tax assessed under joint assessment.

Given that you mentioned it is a one off contract ,if she is not expected to have income in 2009 then it is likely that joint assessment is still the most beneficial form of assessment in the circumstances.
 
Separate assessment:-

Husband income = €70,000

Tax: €35,400 @ 20% = € 7,080
€34,600 @ 41% = €14,186
Personal & PAYE credit= (€ 3,660)

Tax payable = €17,606


Wife income = €15,000

Tax: €15,000 @20% = € 3,000
Personal & PAYE credit= (€ 3,660)

Tax payable = €0

Total tax payable (Husband & Wife) = €17,606



Joint Assessment

Total income = €85,000

Tax: €59,400 @ 20% = €11,880
€25,600 @ 41% = €10,496
Married & PAYE credits=(€ 7,320)

Tax payable = €15,056

Total tax payable (Husband & Wife) = €15,056

Therefore joint assessment gives saving of €2,550
 
Joint assessment is generally (always?) more beneficial if one spouse is on high rate tax and the other on low rate tax. Otherwise it should make no difference but might be worth option for joint assessment in case circumstances change (although you can do this when this happens if necessary). Use Karl Grabe's tax calculator to estimate the difference between separate and joint assessment: www.taxcalc.eu.
 
You must log in or register to reply here.
Back
Top