Utilising pension contributions for income tax purposes

HeinekenTicket

If someone made pension contributions during 2009 but has sufficiently low income from 2009 to eliminate an income tax obligation without considering the pension payments (i.e. by means of personal and PAYE tax credits), can the person simply leave the pension payments off the 2009 tax return and carry them forward to offset against 2010 income?

thanks for clarification on this matter.

dbran

Yes

HeinekenTicket

Thank you - one supplementary:

is there a limit on how many years' forward the pension payments can be carried?

nompere

No.

Slasher

nompere wrote: »

No.

I am no expert, and you may very well be, but I don't think that's correct.

Here's how I understand it:

If you make a contribution to a pension scheme some time in the period from 1 January 2010 up to 31 October 2010, when you make your 2009 tax return, you can apply that contribution against your 2009 income, or you can apply it against your 2010 income.

This is from www.Revenue.ie

"If a contribution is paid after the end of the year, but before the following 31 October, relief may be allowed in the earlier year provided an election to do so is made by the individual on or before the 31 October."

See http://www.revenue.ie/en/tax/it/leaflets/it14.html#section1a

NCG

Slasher, you are correct, but they are two different things.

You can carry qualifying pension premia forward until they can be used in subsequent years (subject to % of net relevant earnings etc).

What you are referring to is the ability to carry premia backwards. For example, in calculating your 2009 income tax liability in October of this year, you can obviously deduct premia paid in 2009 + any carried forward from earlier years (on which relief has not yet been claimed) + any paid in the 10 months to 31 October 2010. This is allowing you to apply 2010 costs against your 2009 income. You may also of course just keep these 2010 payments for offset against your 2010 income.

It requires a little planning, but the overriding principle is obviously that you can only claim relief for any one payment once.

J.Ryan

Pension contributions are capped at the % of net relevant earnings (decided by your age).

Unutilised contributions are carried forward until they are used, however once you hit 66 (that age may change when the retirement age increases), you can no longer avail of them, I had it happen to a client a few years back.