Double tax blow for families with savings and rental property
ORDINARY families that have savings and a property they rent out are set to be hit by a double whammy of taxes.
From January, thousands of workers who have non-PAYE income, such as rents and savings interest, will have to pay social insurance on this income.
It comes as DIRT (deposit interest retention tax) on savings is set to jump to 41pc in January – making it one of the highest savings rates in the world.
The Department of Finance has clarified that anyone with income of over €3,174 from rent and savings will have to pay PRSI (pay-related social insurance) on the interest.
This will mean that many in middle Ireland will be hit by a double whammy of DIRT and PRSI of a combined 45pc on their savings.
For example, the move to impose DIRT and PRSI will see someone who had a deposit of €200,000 after being made redundant, getting hit with a tax bill of €2,460 from their annual interest of €6,000.
It was also confirmed that non-PAYE income also includes dividend and investment income.
The move means people with buy-to-let properties are likely to be pushed into paying PRSI on their savings, as well as their rental income.
They will have to file an income-tax return, according to the Departments of Finance and Social Protection.
Thousands of families that have been forced to rent out their homes because they cannot afford the mortgage are set to be the biggest losers from the new double-whammy tax move.
These so-called "accidental landlords" will now have to include any interest they get from their savings along with rental income and make a return to the taxman.
Others who bought a buy-to-let during the boom to boost their pension will also be hit by the new double tax measure, as their rental income may mean they already have to make a tax return.
There are some 273,000 rental properties registered with the Private Residential Tenancies Board.
Buy-to-let owners are able to deduct some of the interest they pay and some expenses from the rent for tax purposes.
But the rest will have to be declared as rental income. It will now attract income tax and PRSI if it is above €3,174.
Accountant Cathal Maxwell of PayLessTax.ie said: "Accidental landlords will be sucked into this if their non-PAYE income is more than €3,174."
However, people over the age of 66 are set to escape paying PRSI on their savings.
The Department of Social Protection confirmed: "At pension age (currently 66) a person is no longer liable to pay PRSI on any income, regardless of its source (ie rental income, deposit interest etc)."
And those over the age of 65 get an exemption from DIRT if they have an income below €18,000 a year for a single person, and €36,000 for a couple.