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Tax Exemption on Pension Income Received after 61 years of age
S.L. 123.204 – Pensions (Tax Exemption) Rules seeks to remedy the situation where pension income is taxed under Article 4(1)(d) of the Income Tax Act and as a result, other income earned in the same year is also taxed at a higher personal rate. To overcome this higher tax burden, the Government has implemented steps to ensure that over a span of 5 years all pension income shall be exempt from tax (subject to capping).
Pension income derived by an individual on or after 1 January 2022, after the age of 61, shall be partially or fully exempt from tax as follows:
Table 1 – Tax Exemption on Pension Income
| Amount Exempt | Applicability of the Exemption* |
| Pensions derived in basis year 2022 | 20% but not exceeding €2,864 |
| Pensions derived in basis year 2023 | 40% but not exceeding €5,987 |
| Pensions derived in basis year 2024 | 60% but not exceeding €9,732 |
| Pensions derived in basis year 2025 | 80% but not exceeding €13,309 |
Full pension exemption will be in place as from basis year 2026, subject to a capping amount to be determined in the next Budget.
Examples: Pension Exemptions
The following examples outline the application of the pension exemptions.
1. Individual Taxpayers in Receipt of Pension Income falling below the Tax Threshold
Table 2 – Income below Tax Threshold
| Comment | ||||
| Basis Year | 2022 | 2023 | 2024 | |
| € | € | € | ||
| (a) Taxable Pension Income | 11,700 | 11,700 | 11,700 | Gross Pension |
| Tax Exemption Percentage | 20% | 40% | 60% | S.L. 123.204 |
| (bi) Exempt Pension Income | 2,340 | 4,680 | 7,020 | Based on exemption percentage |
| Max Exemption permitted | 2,864 | 5,987 | 9,732 | |
| (bii) Exempt Pension Income | 2,340 | 4,680 | 7,020 | Max Allowed |
| (c) Chargeable Income after Exemption | 9,360 | 7,020 | 4,680 | (a) – (bii) |
The applicable rate of tax will depend on the individuals’ personal circumstances. Tax rates can be found on the following link. For a single individual, total tax paid shall be as follows:
| (d) Tax on chargeable income | 39 | 0 | 0 | |
| Tax Rebate Rate | 15% | 15% | 15% | S.L.123.174 |
| Max Tax Rebate | 783 | 880 | 1,068 | |
| (e) Tax Rebate | 39 | 0 | 0 | |
| Total Tax Paid | 0 | 0 | 0 | (d) – (e) |
2. Individual Taxpayers in Receipt of Pension Income falling above the Tax Threshold
Table 3 – Above the Tax Threshold
| Basis Year | 2022 | 2023 | 2024 | Comment |
| € | € | € | ||
| (a) Taxable Pension Income | 20,000 | 20,000 | 20,000 | Gross Pension |
| Tax Exemption Percentage | 20% | 40% | 60% | S.L. 123.204 |
| (bi) Exempt Pension Income | 4.000 | 8,000 | 12,000 | Based on exemption percentage |
| Max Exemption permitted | 2,864 | 5,987 | 9,732 | S.L. 123.204 |
| (bii) Exempt Pension Income | 2,864 | 5,987 | 9,732 | Max Allowed |
| (c) Chargeable Income after Exemption | 17,136 | 14,013 | 10,268 | (a) – (b) |
The applicable rate of tax will depend on the individuals’ personal circumstances. Tax rates can be found on the following link. For a single individual, total tax paid shall be as follows:
| (d) Tax on chargeable income | 1,469 | 737 | 175 | |
| Tax Rebate Rate | 15% | 15% | 15% | S.L.123.174 |
| Max Tax Rebate | 783 | 880 | 1,068 | |
| (e) Tax Rebate | 783 | 737 | 175 | |
| Total Tax Paid | 686 | 0 | 0 | (d) – (e) |
3. Individual Taxpayers in Receipt of Pension Income and Other Income
Table 4 – Other Income
| Basis Year | 2022 | 2023 | 2024 | Comment |
| € | € | € | ||
| (a) Taxable Pension Income | 20,000 | 20,000 | 20,000 | Gross Pension |
| (b) Other Income | 15,000 | 15,000 | 15,000 | Gross |
| (c) Total Gross Income | 35,000 | 35,000 | 35,000 | |
| Tax Exemption Percentage | 20% | 40% | 60% | S.L. 123.204 |
| (bi) Exempt Pension Income | 4,000 | 8,000 | 12,000 | Based on exemption percentage |
| Max Exemption permitted | 2,864 | 5,987 | 9,732 | S.L. 123.204 |
| (bii) Exempt Pension Income | 2,864 | 5,987 | 9,732 | Max Allowed |
| (c) Chargeable Income after Exemption | 32,136 | 29,013 | 25,268 | |
| (d) Tax on chargeable income | 5,309 | 4,528 | 3,592 | |
| Tax Rebate Rate | 15% | 15% | 15% | S.L.123.174 |
| Max Tax Rebate | 783 | 880 | 1,068 | |
| (e) Tax Rebate | 783 | 737 | 175 | |
| Total Tax Paid | 4,526 | 3,791 | 3417 | (d) – (e) |
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