U.S. EXPAT TAX GUIDE – IRELAND
How does the Irish income tax system work for Americans living in Ireland?
The Irish tax system is based on the calendar year and operates on a self-assessment basis. It includes various forms of taxes such as income tax, value-added tax (VAT), and corporation tax.
The Irish Revenue Commissioners, known as Revenue, administer and collect these taxes. The primary tax concerning individuals is income tax, which applies to earnings, including wages, rental income, benefits, pensions, and dividends.
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Who is considered a tax resident in Ireland?
You are considered a tax resident in Ireland if you spend 183 days or more in the country within a calendar year or 280 days over two consecutive years.
Tax residency can also be determined by your intention to remain in Ireland. As a tax resident, ordinarily resident, or domiciled person in Ireland, you must pay Irish tax on your worldwide income.
Ordinarily resident means being a resident for three consecutive tax years.
Non-residents are liable to pay Irish tax on Irish-sourced income.
How does the US-Irish double taxation treaty work?
The US-Irish Double Taxation Treaty aims to prevent double taxation of income by both countries. It determines which country has the right to tax different types of income.
For example, if you’re a US citizen working for an Irish company, your salary is generally taxable by Ireland first. This treaty helps US citizens avoid paying taxes twice on the same income, offering relief through tax credits on their US tax return for taxes paid in Ireland.
What counts as taxable income in Ireland?
Taxable income in Ireland includes:
- Salary from employment
- Income from trade or profession
- Rental income from property
- Investment income
- Foreign income
- Certain social welfare payments
To calculate your taxable income:
- Calculate Your Gross Income: Total amount earned from all sources during the tax year.
- Identify and Subtract Allowable Deductions: Include job-related expenses, medical expenses, pension contributions, etc. Subtracting these from your gross income gives your taxable income.
What are the Irish income tax rates and bands?
Ireland uses a dual-band system:
- Standard Rate: 20% on income up to a certain limit.
- Higher Rate: 40% on income above that limit.
The standard rate cut-off point varies depending on your civil status and whether you have dependent children.
Which tax return should I file first, my Irish or US?
In most cases, it makes sense to file your Irish return first. Take your total tax paid to Ireland and claim a Foreign Tax Credit (FTC) on your US tax return, so you’re not double-taxed. Because income tax rates are higher in Ireland than they are in the US, you’ll end up with a larger credit than you need, so that benefit will be carried forward to your next US tax return.
How do you file your Irish income tax return?
The Irish tax year runs from January 1 to December 31. The deadline for filing your income tax return electronically is usually around November 15 of the following year.
For paper returns, the deadline is earlier on the 31st of October.
To file your return, you can use the Revenue Online Service (ROS), a user-friendly system for filing taxes online.
Additionally, the Pay-As-You-Earn (PAYE) system, where employers deduct taxes from wages, simplifies the process and reduces the likelihood of a large tax bill at year-end.
Filing a return allows you to claim additional credits or reliefs and potentially receive a refund.
How do you file your US tax return?
Check out our guide on how to file your US tax return here:
https://www.expattaxonline.com/federal-tax-return-filing/
What tax credits and reliefs are available in Ireland?
Some popular tax credits and reliefs include:
- Personal Tax Credit: Available to all Irish tax residents.
- Earned Income Credit: For self-employed or non-PAYE income earners.
- Age Tax Credit: For those aged 65 or over.
- Home Carer’s Credit: For married couples or civil partners with one person caring for a dependent.
- Medical Expenses Relief: 20% on certain medical expenses.
- Tuition Fees Relief: Covers certain fees for third-level education.
US citizens can claim these credits when completing their annual tax return. Keep records and receipts to validate claims.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
