u.s. expat tax guide – ireland
How does the Irish tax system work for Americans living abroad—in Ireland?
For Americans residing in Ireland, the tax system operates on a calendar year and follows a self-assessment method.
This means you are responsible for calculating and paying your taxes, which include income tax, VAT (value-added tax), and corporation tax.
The Irish Revenue Commissioners, often referred to as Revenue, handle the collection and administration of these taxes.
The most relevant tax for individuals is income tax, which applies to earnings like wages, rental income, pensions, and dividends.
What makes someone a tax resident in Ireland?
You become a tax resident in Ireland if you spend at least 183 days in the country within a single year or 280 days over two consecutive years.
However, your intention to stay in Ireland can also influence your tax residency status. As an Irish tax resident, you’re required to pay taxes on your global income. But if you’re a non-resident, you only pay taxes on income generated within Ireland.
How does the double taxation treaty between the US and Ireland work?
The US-Irish Double Taxation Treaty ensures that Americans living in Ireland don’t pay taxes on the same income twice.
For example, if you earn a salary from an Irish employer, Ireland taxes it first. You can then apply for tax credits on your US tax return for the taxes you paid in Ireland, effectively reducing your US tax liability.
What kinds of income are taxed in Ireland?
In Ireland, taxable income includes:
- Wages or salary from employment
- Business or professional income
- Rental income from properties
- Investment income
- Foreign income sources
- Certain types of social welfare payments
To figure out your taxable income, you’ll need to total all your earnings and then subtract any allowable deductions, such as expenses related to your job or healthcare costs.
What are the income tax rates in Ireland?
Ireland has two main income tax rates:
- 20% Standard Rate: This rate applies to income up to a certain limit.
- 40% Higher Rate: This rate kicks in for income above that limit.
It’s important to note that the threshold for these rates depends on factors like your marital status and whether you have dependent children.
Should I file my Irish or US tax return first?
Typically, it’s smarter to file your Irish tax return before your US tax return.
By doing this, you can determine how much tax you’ve paid in Ireland and then use the Foreign Tax Credit (FTC) on your US tax return to avoid double taxation. Since Irish tax rates are usually higher than US rates, you might have leftover credits that can be used in future tax years.
How do I submit my Irish income tax return?
The Irish tax year runs from January 1 to December 31, and your tax return is typically due electronically by November 15 of the following year.
If you’re filing a paper return, the deadline is October 31. You can file your return through the Revenue Online Service (ROS), which is a straightforward online platform.
For those employed, taxes are generally deducted from your paychecks via the Pay-As-You-Earn (PAYE) system, reducing the risk of a large tax bill at the end of the year.
What are the available tax credits and reliefs in Ireland?
Some of the common tax credits and reliefs in Ireland include:
- Personal Tax Credit: Available to all tax residents.
- Earned Income Credit: For those who are self-employed or have non-PAYE income.
- Age Tax Credit: Available to individuals aged 65 or older.
- Home Carer’s Credit: For married couples or civil partners where one spouse takes care of a dependent.
- Medical Expenses Relief: Offers relief on certain medical expenses.
- Tuition Fees Relief: Provides relief on certain higher education fees.
Americans living in Ireland can claim these credits when filing their Irish tax returns.
Make sure to keep all relevant documentation and receipts to support your claims.
