Separation, divorce and income tax credits and reliefs
When a married couple decide to separate and the separation is likely to be permanent, there are implications for the way in which they are taxed. It is important to understand the different taxation options available and how decisions about maintenance payments will affect taxation.
There are a number of legal approaches for married couples who wish to separate and the Revenue Commissioners recognise that a couple may separate without any formal arrangements. In that case, the couple should contact Revenue after the actual separation, so that the necessary tax adjustments can be made for the year in which the couple separate and for the following tax years.
COVID-19 and re-opening of Revenue’s telephone helplines
Revenue’s public offices remain closed while public health measures are in place. The national PAYE helpline has re-opened Monday to Friday, from 9.30am to 1.30pm. Queries can also be sent through myEnquiries.
Taxation in the year of separation
How a couple are taxed in the year in which they separate will depend on how they were taxed as a married couple. They may have been taxed under single assessment, separate assessment or joint assessment. For more information on these options, read about taxation of married people and civil partners.
- If a couple are assessed as single persons , there will be no change in their tax assessment if they subsequently separate.
- If a couple are taxed under separate assessment, their income up to the date of separation is assessed in the usual way and they can transfer between them any unused tax credits and rate bands that apply. For the remainder of the tax year after separation each spouse will be treated as a single person and the single person’s tax credit will apply to their income.
- Under joint assessment, one spouse is accountable for tax purposes, the assessable spouse.
If you are the assessable spouse, you are entitled to the married person’s tax credit and double rate bands for the full year in which you separate. You are taxed on your own income for the full year as well as your spouse’s income for the year up until the date of separation.
If you are the spouse who was not assessable, then you will be taxed on your
own income from the date of separation. You will be entitled to the full single
person’s tax credit and taxed under the single rate bands. If there are
legally enforceable maintenance payments then you may choose instead to
continue to be taxed as a married couple.
Taxation in subsequent years
Depending on their circumstances, separated/divorced spouses may choose to be taxed either as a married couple or as single persons after the year in which they separate. The payment of maintenance and the type of maintenance payments are important in deciding which tax arrangement will apply.
Where one spouse provides payments for the support of the other spouse and/or children, these are known as maintenance payments. Maintenance payments may be made under informal voluntary agreements or they may be legally enforceable.
Voluntary maintenance payments
Voluntary maintenance payments are ignored for tax purposes: the spouse who makes the payment is not entitled to a tax deduction for it and the spouse receiving the payment is not taxed on it. Both spouses are taxed as single people on their other income. If you are paying voluntary maintenance and it is your spouse’s main income, then you may claim the married persons tax credit, rather than the single person’s credit, but you will still have the tax rate band for a single person.
Legally enforceable maintenance payments
Legally enforceable maintenance payments include those made under a court order or ruling, a deed of separation, a covenant or a trust.
If the maintenance payment is for the benefit of a child then it is ignored for tax purposes. The spouse who makes the payment is not entitled to a tax deduction for it and the spouse receiving the payment is not taxed on it.
A maintenance payment for the benefit of a separated spouse is taxable for the receiving spouse. The paying spouse does not pay tax on it; it may be deducted from their taxable income. Both spouses in this case are taxed as single people.
Separated spouses may choose instead to be taxed as a married couple if there are legally enforceable maintenance payments. In this case the payments are ignored for tax purposes; the spouse who makes the payment is not entitled to a tax deduction for it and the spouse receiving the payment is not taxed on it.
If they wish to be taxed as a married couple they must both confirm this in writing before the end of the tax year. To be eligible they must both be resident in the State and there must be a legally enforceable agreement for maintenance payments. If they are divorced, they must not have remarried.
The way that maintenance payments are assigned either for the benefit of the spouse or children effects the way that the payment is taxed. This may make a difference to the amount of money actually received so it may be important to seek tax advice before maintenance payments are agreed.
If you are divorced, your tax situation is the same as in the case of separation.
Single Parent Child Carer Credit
If you are separated or divorced and you have a child that you support and that resides with you for the greater part of the year, then you may be eligible for the Single Parent Child Carer Credit.
How to apply
If you separate and the separation is likely to be permanent then you should contact your tax office to inform them of your change in circumstances.