Twins on the way, moving to a bigger place, Budget '13, tax advice?

[bibiphoque]

We are on two incomes at the moment, both on the marginal tax rate, currently doing 2 separate tax returns.
We have a decision to make for next year as my partner is expecting twins.

She is a contractor and will not get anything from her company when she stops working to go on the maternity benefit. We are planning for her to stay home after that (at least for a few years anyway).
We are planning to rent our property (2 beds apartment) and rent a 3 bedroom house.

Now the question: purely for tax reason, should we get married?

If we are married and do a joint tax return, my marginal rate will go from €32K to €41K (~€1900 saving per year) and I get her tax credit (~€1650 saving) so in total we save €3550 per year (€300 per month).

However, the rent income will be taxed at the marginal rate...to make it simple, let's say we rent our place for €1000 per month, we would owe €4920 of tax (before tax relief, and I also need to add the PRSI and USC on this...).

Finally, her maternity benefit will be taxed if I understand correctly the budget '13?? Is that on the marginal rate because of my income?

The other solution is to not get married and keep filling in 2 tax returns.

Her maternity benefit will not be taxed that way, and she could declare the rent income as it will only get taxed on the lower tax rate instead of the marginal rate if I was going to declare it. Is that legal?

We have so many changing factors, and with the new budget it is hard to make the right decision...

What would you do in our situation?

 

[Joe_90]

You need to look at each income. You and your partner earn more than 32k with you earning more than 41k.

So if you get married you are correct you can get the benefit of your wife's standard rate cut off and tax credits.

Look at next year, she will have a certain amount of income for the period that she is working, you don't mention when she is finishing up, so she may use up some of her credits in this employment.

The rental is assessed to tax after taking account of mortgage interest x 75%, PTRB, insurance, other rental expenses. Then if owned jointly split the profit in two and you will pay 41% tax, PRSI, USC you're wife will pay 0%, 20%, 41% depending on her employment income next year.

If you want to throw out some figures I can give more info.

 

[gianni]

And they say romance is dead

 

[bibiphoque]

And they say romance is dead

Joe, thanks for your reply. So what you are suggesting is keep two separate tax returns so we can split the rent income, I'll pay marginal tax + PRSI + USC and she will very likely pay no income tax, although I'm guessing she still has to pay the PRSI and USC too? Is it legal for her to declare all of it if we both own the property? In that case I don't get her credits correct?

She will stop her contract in early april and will then be on maternity benefit for 6 months.

 

[Brendan Burgess]

Now the question: purely for tax reason, should we get married?

No, you should not get married for tax reasons.

If you are planning to get married anyway, you might do so a bit earlier if there are tax advantages.

Brendan