D.i.r.t.

[drums]

I am trying to understand how DIRT tax has been applied to me. I completed a form 11 for 2007. I included gross deposit interest received of which I have already paid 20% dirt to the bank. I have received a statement P21 and the deposit interest is included in my income and looks like it is being taxed again ? I now have an underpayment !!

 

[extopia]

You should find that your standard rate tax band has been increased by the (gross) amount of interest you received, and you have a tax credit for the amount of DIRT you paid. This cancels out the effect of adding the interest to your gross income.

 

[suzie]

In a similar position. Revenue added the gross interest to my income, then also gave me a DIRT (20%) credit. But does this imply that the interest is being taxed at the marginal rate?

To illustrate as a simple example: Lets say my standard rate band was 4000 and my salary is 4000 then my tax is 800 + 20 from the dirt (with 80 interest sitting in my account) = 820

But using the revenue calculations:

4000 @ 20% = 800
100 @ 40% = 40

gives 840 - 20 (credit) = 820 payable tax

But havent they already taken my 20 euros tax via the DIRT? Also they have applied PRSI calculates to the gross interest which from reading on the forums is correct. Its the above that has me confused?

Or have I got my sums wrong?

Thanks

S.

 

[extopia]

Hi Suzie,
My post above was unclear, so I've edited it.

Using your numbers, your 20% tax band would be increased to 4,100 to reflect the 100 gross interest and you'd have a tax credit of 20 for the DIRT paid.

So tax bill would be:

4,100 @ 20% = 820
Less Tax Credit of 20
Payable = 800