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Can I Claim Tax Relief on The Maintenance I Pay My Wife
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Written by James D. Crawford   
Thursday, 22 December 2011
Q I'm paying maintenance to my wife. We are living apart, separated rather than divorced. Can I claim tax relief on the payments?

A If the payment is legally enforceable and in respect of your wife, not in respect of children, you are entitled to claim tax relief on it, but it then becomes taxable in the hands of your wife, assuming she has sufficient income to be liable for tax. You need, of course, to be taxed as two single individuals rather than as a married couple.

That's the simple answer to the question you ask, but you need to consider other issues.

If your wife has no income of her own, you may be better opting to be taxed as a married couple so that you can benefit from married credits and wider tax bands.

That may not be the best option because if there are children who spend some time with each of you as single taxpayers you could each qualify for the one-parent family tax credit. You also need to consider the impact of changes on any social welfare benefits being claimed by your wife.

There is no single best solution. Ideally, you should sit down with your wife, do the sums and work out what's best for you both.

Q I have a State pension of €240.30 a week and a private pension of €14,500 a year. When my wife was alive I was not liable for tax but she died last May. I told my pension provider, thinking they would deduct tax if it was due. How am I fixed? If I owe tax, what should I do?

A You have no need to worry this year. You are still entitled to avail of the full married couple's exemption limit of €36,000 a year for 2011.

Assuming no change in pension rates, your total income next year will be about €27,000.

The exemption limits are being phased out over four years and may be down to €16,000 per person next year. It will certainly be less than €18,000, so you will be liable for tax and your pension provider should stop it from January 1 next.

You should inform the tax office of your change in circumstances.

Q I know that I can gift my daughter or son up to €332,084 in cash this year, and, assuming that there have been no other lifetime gifts, they will be exempt from Capital Acquisitions Tax. Am I right in thinking that the same applies to a dwelling house that is not my residence although I might be liable for Capital Gains Tax? Is this an anomaly in relation to the ownership of second homes or am I just misunderstanding the application of the rules?

A A child can get €332,084 from his or her parents free of Capital Acquisitions Tax.

Gifts and inheritances received since December 5, 1991, are taken into account and gifts of up to €3,000 a year from any single donor are ignored in making the calculation.

This applies whether the gift consists of cash or of property.

But someone who has been living in a house for the previous three years as their principal private residence and who has no interest in any other residential property can receive that house by way of gift or inheritance tax free. That's in addition to the €332,084 general tax-free threshold. The recipient must continue to live in the property for six years after the transfer.

A person making a gift of a house is treated for Capital Gains Tax purposes as if they sold the house. There is no tax liability on the sale of a person's principal private residence, but there can be on the sale of any other property. That would apply to a second home.
Last Updated ( Thursday, 22 December 2011 )