Marital Breakdown

Legally Enforceable Maintenance Agreements

Separated spouses are taxed as single persons with maintenance payments made being deductible in the hands of the payer and chargeable in the hands of the recipient. Both may elect for joint assessment for income tax purposes if the following applies :-

  • Both parties reside in Ireland in year of assessment
  • Neither spouse has remarried, if divorced

Consequences of election

  • Both parties assessed as a married couple
  • No deduction for maintenance payments by paying spouse
  • Recipient is not taxed
  • Recipient does not pay PRSI or levies on maintenance payments

Social Welfare Benefits may be affected by election.

Where payment is made for the benefit of a child for whom the payer was entitled to child allowance, the payment is to be made without deductions of tax and the payment does not reduce the total income of the payer for income tax or USC purposes.

Where an individual is making maintenance payments to their separated or divorced spouse and is not jointly assessed with that spouse, those maintenance payments are deductible for the purposes of calculating the Universal Social Charge.

Transfer of Assets – Divorced Persons

Disposal of assets under a Court Order pursuant to a decree of divorce will not give rise to a gain or a loss. The spouse is deemed to take the asset at the same time and at the same cost to the disponer unless the asset is part of trading stock.

Transfer of Assets – Separated Spouses

Disposal of assets pursuant to a Grant of Judicial Separation under The Family Law Act 1995 or to a Deed of Separation which takes place after 1 August 1996 will not give rise to a gain or a loss. The spouse acquiring the asset is deemed to take the asset at the same time and at the same cost to the disponer.

Capital Acquisitions Tax

A transfer between spouses as part of a separation agreement, court order or divorce settlement is exempt from CAT. This exemption applies to foreign divorces recognised as valid in Ireland . Subsequent to a decree of divorce, ex-spouses have a Group 3 threshold in relation to each other i.e. stranger threshold (refer to CAT Threshold table).

 

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Civil Partnerships

Civil partnerships have been placed on the same footing as married persons in certain situations including the following:

  • Payments by a child of a civil partner to an individual do not qualify for rent a room scheme.
  • One parent family tax credits are available to civil partners after a relationship break up, notwithstanding the partners may be residing under the same roof. Child Carer Credit will be available to the primary carer of a qualifying child provided the child resides with the claimant for the whole or greater part of the year. Where the primary carer disclaims the relief the secondary carer may claim the credit
  • Principle private residence relief on the sale of a house occupied by a dependant relative of a civil partner.
  • ARF distributions on the death of an individual made to a child of a civil partner of an individual.
  • Annuity to a surviving civil partner.
  • Maintenance payments to civil partners.

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