Q. I am a widow with a personal pension and the State pension. I have money on deposit in the bank and have heard that I may be liable for tax on this. Is that correct?
Dear Reader,
Standard deposit accounts are subject to Deposit Interest Retention Tax (DIRT) at 30% in 2012. On most accounts, this DIRT is automatically deducted by the bank when the interest is paid. Generally this DIRT covers the income tax on the deposit interest.
However, the interest should be included in your tax return and depending on your personal circumstances, you may be liable to PRSI or levies on the deposit interest. PRSI applies on the interest if you have self employment income or a Directorship until you reach the age of 66. Deposit interest is not liable to Universal Social Charge, but you may be liable to health contributions for the years to 2010 if your income was over €26,000.
If you are over 65 it may be possible to get deposit interest paid without DIRT being deducted if your total income is below a certain amount. For 2012 the income tax exemption limit for over 65’s is €18,000 for you as a single/widowed person whereas for a married couple they can earn €36,000 without paying income tax.
If your income is below the exemption amounts (which were higher up to 2010) then you would not be liable to income tax and any DIRT that was deducted from the deposit interest could be refunded by the Revenue by sending in a simple form. It may be possible to get a tax refund for the past four years.
However, if you have a deposit account that has been classified as DIRT-exempt and your income is now above the exemption limit, then you could be liable to tax on the interest as the bank did not deduct DIRT when the interest was paid into your account.
This column is a readers’ service and is not intended to replace professional advice.
Sandra Geary
Taxation Department, ODCL
