Separation - tax implications

John_Rogerson

Hello,

My spouse and I are currently separating, no children involved, no property.

I will be paying her monthly maintenance payments for a fixed period under a separation agreement we are drawing up between our respective solicitors. Does that constitute a legally enforceable maintenance arrangement, or is that considered a voluntary arrangement. And summing up, bearing in mind there is a tax credit for maintenance payments, is it better for me to stay on joint assessment for tax purposes, or be taxed as a single person? Are there any other implications for a future divorce?

Thanks

Payton

You will both be taxed as single persons.

John_Rogerson

Payton wrote:

You will both be taxed as single persons.

But we have the choice to be taxed as single persons or jointly up to divorce. That is what I'm asking; which is better? Pros/cons?

Payton

Have a look here:http://www.revenue.ie/en/tax/it/leaflets/it3.html

From what I can see when you are legally separated you are both taxed as single persons. I'm open to correction.

John_Rogerson

My understanding is that you have the choice, hence my question.

Stheno

John_Rogerson wrote: »

My understanding is that you have the choice, hence my question.

Only if you have a legal seperation agreement with legally enforceable maintenance payments.

From the link above

pdfClaim for Relief for Legally Enforceable Maintenance Payments (PDF, 311KB)

Can separated or divorced couples opt to be taxed as a married couple?

Yes, a separated couple can elect to be treated as a married couple for income tax purposes if:

Maintenance payments by one to the other are legally enforceable, and,
they are both resident in the State.

A divorced couple also has the option of electing to be treated as a married couple for income tax purposes if:

maintenance payments by one to the other are legally enforceable,
they are both resident in the State, and,
neither spouse has re-married or entered a civil partnership.

The couple must submit a joint election if they wish to be taxed as a married couple. This election must be made in writing before the end of the tax year and must be signed by both spouses. If such an election is made, the maintenance payments are ignored. The spouse making the payments does not get a tax deduction for them and the spouse who receives the payments is not taxable on them.

Where only one spouse has income, the full tax credits, reliefs and the appropriate Married Person or Civil Partner standard rate band will be given to that spouse.

Where both spouses have income, separate assessment will apply. Tax credits and standard rate band will be apportioned between the spouses, subject to a review at the end of the year. This ensures that any unused tax credits or relevant standard rate band are given to the other spouse.

If you opt to be taxed as a couple Revenue will look at your incomes and determine how best to assign credits.