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Marriage has some very tasty tax benefits attaching to it
Here's how to claim them
The first big benefit of being married is that you get to choose how you are taxed, writes John Lowe.
BILLY CONNOLLY, ONE of my favourite comedians, famously said: ‘Marriage is a wonderful invention, but, then again, so is a bicycle repair kit.’
However, unlike a bicycle repair kit, marriage has some very tasty tax benefits attaching to it. And in this chapter I will explain how you can take advantage of them.
Marriage brings greater flexibility
The first big benefit of being married is that you get to choose how you are taxed. The options open to you are:
Joint assessment
This means that you will be taxed as one unit and allowed some tax concessions not used by one spouse to be transferred to the other.
Separate assessment
This is very like joint assessment except that all the available allowances are split evenly between you and your spouse.
Single assessment
This is where you and your spouse decide to be treated as if you were two single people for tax purposes.
Why this flexibility of benefit?
Basically, you can choose to be taxed in the way that will produce the greatest possible tax advantage given your personal circumstances. Under joint assessment and separate assessment, some unused allowances can be passed between husband and wife. This is particularly beneficial in the case of a two-income couple where one spouse earns more than another.
Under normal circumstances, the Revenue Commissioners will assume that you wish to be taxed under joint assessment, and will calculate your tax liability accordingly.
However, it is worth checking that you are taking full advantage of all the allowances and tax credits open to you, as the Revenue Commissioners may not be fully aware of your financial situation.
The only circumstances under which most people might wish to be taxed under the single assessment system is where they are separated.
Other tax concessions made to married couples
A number of other generous tax concessions are made to married couples, including:
- Assets may be transferred between husband and wife without being subject to capital gains tax.
- Any capital losses made by one spouse may be used by the other spouse to reduce a capital gains tax bill.
- Any gifts or inheritances given by one spouse to another are completely free of capital acquisition tax.
- Any money received by yourself or your spouse from a life assurance policy (providing you or your spouse were the original beneficial owners) will be completely tax-free.
- Married couples do not have to pay stamp duty when they transfer assets from one to another.
Even better news if you are married and self-employed
If you are self-employed or run your own business, by employing your spouse, you may be able to save up to €5,000 a year in tax. To make this saving, the total amount of income you and your spouse earn each year must be at least €70,800. It doesn’t, by the way, all have to come from your own business.
Your spouse can earn up to €25,000 and you can still gain a tax benefit. The reason why the tax saving can be made is the fact that a two-income family can take advantage of a €67,600 standard rate band as opposed to the €42,800 band available to a single-income family.
Turn your children into a tax advantage
If you’re self-employed, and if you have children, you may be able to avoid tax on up to €16,500 per child a year. This is because your children are entitled – like anybody else – to avail of tax credits.
Of course, the child must actually be doing the work for which they are paid – and it may be necessary for you to register as an employer for PAYE and PRSI purposes – but given the tax saving this has to be worth it! However, the child may have to pay PRSI and USC of €789 and you as the employer will be liable for the employer’s PRSI contribution.
John Lowe is the author of The Money Doctor 2018 (Gill Books, €12.99) available from all good bookshops and online.
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