Tax query - investment income is only income

R

RedOnion

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Hi,

I have a tax query if those more knowledgeable than I could help out please.

If an individual has no income other than investment income, what is that tax treatment on that income for both income tax & PRSI?

Specifically I am talking about a scenario where within a married couple, there is single PAYE earner at the higher tax rate, and a stay at home wife.

Am I correct in thinking that if the couple were making an investment which would be subject to income tax (let's say a debt free rental property and high dividend yield stocks for illustration), that if these investments were made solely by the wife, she could use her tax band to earn investment income at 20% up to c. 25k per annum?

And secondly, specifically in relation to PRSI, as this would be her only source of income, she would be subject to Class S PRSI (minimum 500), which in turn counts towards contributory pension in the future?
 
Sounds right to me. I don't know if it's complicated by being a couple instead of single. But you can definitely use your TFA and tax band against unearned income. And yes, you can pay Class S PRSI if it is your only source of income (again, not sure if the married status is relevant). Don't forget USC on both rental income and dividends if you are above the threshold for that.
 
Ah, yes. I'd forgotten to factor in USC.

Now I just need the winning lotto numbers...
 

Now I just need the winning lotto numbers...

If ya get those, remember there's no tax to pay on the winnings!!!
 
Kerry Gooner said:
If that income was deposit interest, would it not be subject to DIRT first.
Click to expand...
The OP was asking about rental and dividend income. But yes, deposit interest is an anomaly for people with no/low income from employment. It is subject to DIRT plus 4% PRSI but not further income tax or USC . This used to be a good deal a few years ago when DIRT was about the same rate as the lower rate of income tax. Now it's closer to the higher rate (for a couple of years it was above the higher rate). It means that people who have a TFA to use up get hammered for DIRT from the very first cent. If you have a small amount of PAYE income and a lot of deposit interest you can end up in the mad situation where you pay more tax and PRSI than someone earning the same from employment and your PRSI doesn't even count toward any entitlements.
 
It's good to clarify all the scenarios, even if it's not what I had asked, for people who might be in s similar situation.

I'm assuming exit tax on investment funds is treated in a similar manner to DIRT, in that everyone pays at 41% irrespective of other income level?
 
If your income eis low enough and you are over 66, DIRT can be reclaimed/not deducted
 
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