Gintax answers Sunday Independent readers’ questions on tax.
Article published on 12 November 2023
Can I avoid vacant homes tax on the cottage I inherited by selling it?
Q I inherited a cottage in the west of Ireland from my late aunt five years ago but I’ve been living in Australia the whole time. I never rented it out because it needs a lot of work done to it and I didn’t want the hassle of being a non-resident landlord. I read that the vacant homes tax has been increased. I don’t really know how to go about organising a refurbishment of a property in Ireland from Australia, so I was thinking of just putting the cottage up for sale in its current condition. Would this enable me to avoid paying a vacant homes tax?
Barry, Melbourne
A The Vacant Homes Tax (VHT) was introduced last year with the aim of increasing the supply of homes available for rent or purchase. Payment of the new tax is due soon for the 12 months to October 31 2023 and it will be charged at a rate of three times the base amount of a property’s Local Property Tax (LPT). Under a measure introduced in the last Budget, the VHT rate is due to increase to five times the LPT for the next chargeable period, namely the year through October 31, 2024. A home will come within the scope of the VHT if it has been in use as a dwelling for fewer than 30 days in the 12-month chargeable period.
You mention that your cottage needs significant refurbishment. VHT does not apply if the vacant property is derelict to such an extent that it is uninhabitable – if, for example, damp has rendered the property structurally unsafe due to the rotting away of supporting beams. If the cottage is not in such a state of disrepair and was unoccupied for fewer than 30 days, then it would likely be within the scope of VHT.
Properties actively marketed for sale can be exempt from VHT, so this exemption may be available to you for 2024 if you put it up for sale now. However, there are conditions attached to this exemption, including that the advertised price must not exceed market value and that there are no stipulations designed to impede a sale.
If you do sell the cottage, you may have to pay capital gains tax if there is a gain on disposal; broadly, this is calculated as the difference between the proceeds and the market value of the cottage at the date of your aunt’s death.
I’m a teacher and received back pay because I was on the wrong increment level. It looks like that was taxed at 52pc. Surely that’s incorrect?
I work as a teacher and recently discovered I was on the wrong increment level. As a result, I was given a lump sum as backpay for the years that I was on the wrong pay scale. However, I paid 52pc of that back pay in taxes. So out of the €16,899 I was due, I received around €6,500. Can I claim some of this back, as the money was earned in years when I was not in the top bracket for tax purposes? I was on part-time hours and would have been in the 20pc bracket for the most part.
Enda, Co Donegal
A Under changes introduced to the tax system in 2018, payments to employees are taxed when they receive the money irrespective of the year to which the payments relate. Therefore, it’s the employee’s circumstances in that particular year that determine the tax treatment.
You mention a withholding of 52pc, which is the absolute maximum that will apply to employment income in 2023, comprising 40pc income tax, 8pc Universal Social Charge (USC) and 4pc PRSI. You may be entitled to a refund of a portion of the USC as the 8pc rate only applies if annual income exceeds €70,044. Furthermore, if you are married and jointly assessed for income tax, it may be possible to avail of some of your spouse’s 20pc standard rate of income tax band if they are not already fully using it.
Can I share my American wife’s tax credits and tax band?
Q I married an American two years ago and we moved to Ireland. She cannot work here as she doesn’t have a work visa yet so we both rely on my income, which is €65,000 a year. We are registered as jointly assessed with Revenue. Can I benefit from her tax credits and tax rate band?
Brian, Co Kerry
A Residency in Ireland for tax purposes is dependent solely on the number of days spent in the country. In this case, each of you should be regarded as tax resident in Ireland given you seem to satisfy the days test, namely 183 days or more in a calendar year.
An Irish tax resident married couple is automatically entitled to the default standard rate band of €49,000 in contrast to €40,000 for a single person. The basic married persons tax credit is €3,550, double that of a single person. As you are already registered as jointly assessed with Revenue, these should apply automatically. Even if a spouse were deemed non-resident for tax purposes, there may still be an entitlement to their increased bands/credits. This depends on the income level of the non-resident spouse.
