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Tuesday, 13 January 2015 00:00

Tax Reform 2015. Income Tax: How will the assets of the over-65s be taxed?

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This measure results in the exemption of the over-65s from Capi-tal Gains Tax if they use the proceeds of any asset sale to buy a pension-related annuity.

What is the aim of this measure?

The aim of this measure is to eliminate taxation on capital gains in order to encourage pensioners’ private savings which are part of their pension plans.

What was the system of taxation before the reform?

Up until now, the transfer of a person’s main residence was exempt from CGT when they were over 65.

How will asset sales made by the over-65s be taxed after the re-form?

The over-65s who sell assets, whether they are a property or shares (with an exemption limit of €240,000) will remain exempt from taxation if the gain is reinvested in an annuity.

The annuity must be taken out within 6 months of the date of the transaction.

For example: a tax payer who meets the above criteria makes a profit of €250,000 and has to pay tax on the €10,000 which is above the tax threshold.

Exemption: Maximum €240,000

Profit: €250,000

€10,000 taxable gain.

The exemption will be applied in a proportional way - if the whole of the profit made on a sale is invested in an annuity, the profit will be entirely tax free. If a half of the profit made is reinvested in this way, then only a half of the profit will be exempt from tax.

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