Retiring to Ireland? Income taxes!!!

[Bedraggled]

Greetings!

If I were to reside full-time in Ireland for at least 3 years, would I be affected by a burdensome Irish income tax rate?

I am in the 25% USA tax bracket and my prospective Irish tax bracket is 42%. Would I need to pay the difference, 17%, to Ireland?

Try as I might, I am not finding an answer. I may talk to a tax pro when I next travel to Ireland. But until then, does anyone have some info?

Thanks in advance.

 

[Sunset]

Will you be earning work income ? or just investment income ?

It is worse than you think, assuming you are US citizen.
You would have to pay Ireland tax in full then claim a foreign tax credit on your US return (which you have to do as a U.S. citizen worldwide).

The problem becomes that the 2 tax systems are different, so do not assume you will get credit for all your Ireland tax paid (likely you will be a bit double taxed).

If your income is from work, then approx 80K is not taxable by the US.

So short answer is at a minimum you will be paying 42% (marginal rate) or more, but which country gets a share and how much depends a lot on how you "earn" the money.

You will also have to report foreign (Ireland) bank/stock accounts to treasury dept each year. Penalties are severe if you don't.

ps - I'm not Ireland resident, but do pay taxes to 2 countries.

 

[Meadbh]

Here you go:

Moving to Ireland Guide - Tax Residence

Income Tax

Income Tax - Who Pays?


"An individual is resident in Ireland in a tax year if he/she spends 183 days or more in Ireland in that year or spends an aggregate of 280 days in Ireland in that year and the previous tax year. (Presence in a tax year by an individual of not more than 30 days in the State is not reckoned for the purpose of applying the two-year test).

An individual who has been resident in Ireland for three consecutive tax years becomes ordinarily resident in Ireland from the beginning of the fourth tax year. An individual who has been ordinarily resident in Ireland ceases to be so at the end of the third consecutive year in which he/she is not resident."

http://www.revenue.ie/en/practitioner/law/tax-treaties.html

http://www.revenue.ie/en/practitioner/law/double/usprot.pdf

 

[Bedraggled]

Meadbh and Sunset,

Thanks.

We will be retired with 2 USA pensions. Any investment income would be from a tax deferred annuity from which I can postpone withdrawals until 2020. When I expect to return to the USA.

I have dual citizenship. My wife can receive citizenship through marriage to me by residing there for 3 years.

I see it this way: the 3 year stay may cost an extra $15,000 per year multiplied by 3 years or $45,000 total price tag for DW (just learning the terminology).

THe cost would also allow us an Irish adventure. (A reasonably priced adventure)?

Now, do I misunderstand the whole thing? You fine people may have suggested we would be liable for Irish income taxes for 3 extra years, a total of 6 Irish tax bills!?!? Also, that extra $15,000 per year may be a substantial underestimation of the total USA/Ireland tax bill….And 6 years of underestimation sounds like a crusher.

With no grand kids yet, we have a window to get back to the USA in a pretty good time.

Your continued thought, please.

 

[Bedraggled]

I could collect Social security staring in 2017- no "file and Suspend" for me but I would postpone SS if that would increase the tax bill during the Irish Adventure. Would I need to delay SS 6 years to avoid that double taxation.

Oh my! At least this is not boring1

Cheers!

 

[Meadbh]

I was born in Ireland and paid taxes there until I left, but after that I did not have to pay any taxes. Of course the law may have changed since then, so it would be a good idea to consult a tax professional. I suggest you use an Irish firm or one with a branch there. I agree with the advice to limit your taxable income during your stay in Ireland. The tax rates there are very high.

 

[braumeister]

Looks to me as if you have a good plan, but I wouldn't make a move without consulting with a good tax attorney in Ireland.

 

[Bedraggled]

Thanks folks. If you have any more thoughts, I will be grateful.

 

[nun]

Being an Irish citizen and proposing to live in Ireland for 3 years will definitely make you an Irish tax resident. So you will have to pay Irish tax on your US sourced pensions and income according to the Irish tax rules. As a US citizen you'll still have to pay US tax on your worldwide income, but you will be able to resource US income to Ireland so you can take a foreign tax credit on your US taxes for Irish tax paid.

The general principle is that you won't be taxed twice, but you will pay the larger of the two tax bills and you just have to know how much to pay to each country and how to claim credits. There might be some special rates for SS, pensions and dividends and you will have to read the US/Ireland tax treaty to see exactly how to mesh the two systems.

 

[Bedraggled]

nun,

Thanks. Great advice.

Do you think I could end up paying over 50% in income tax when all the paperwork is filed?

Anyone else have a thought?

I a pleased that help is posted very quickly.

Thanks again.

 

[bmcgonig]

Here you go:

Moving to Ireland Guide - Tax Residence

Income Tax

Income Tax - Who Pays?


"An individual is resident in Ireland in a tax year if he/she spends 183 days or more in Ireland in that year or spends an aggregate of 280 days in Ireland in that year and the previous tax year. (Presence in a tax year by an individual of not more than 30 days in the State is not reckoned for the purpose of applying the two-year test).

An individual who has been resident in Ireland for three consecutive tax years becomes ordinarily resident in Ireland from the beginning of the fourth tax year. An individual who has been ordinarily resident in Ireland ceases to be so at the end of the third consecutive year in which he/she is not resident."

http://www.revenue.ie/en/practitioner/law/tax-treaties.html

http://www.revenue.ie/en/practitioner/law/double/usprot.pdf

Without auditing you and looking at airline tickets or whatever, how do they know you have been there for 183 days. In fact how so they even know you're there at all? They don't seem to track me when I enter, I.e., stamping my passport etc.


Sent from my iPad using Early Retirement Forum

 

[Meadbh]

Without auditing you and looking at airline tickets or whatever, how do they know you have been there for 183 days. In fact how so they even know you're there at all? They don't seem to track me when I enter, I.e., stamping my passport etc.


Sent from my iPad using Early Retirement Forum

Dream on. They scan your epassport or machine readable passport and your movements are uploaded into a database. Information may be shared with the US authorities due to FATCA.

http://www.citizensinformation.ie/e...plying_for_or_renewing_an_irish_passport.html

 

[bmcgonig]

Dream on. They scan your epassport or machine readable passport and your movements are uploaded into a database. Information may be shared with the US authorities due to FATCA.

http://www.citizensinformation.ie/e...plying_for_or_renewing_an_irish_passport.html

I've been to Ireland twice this year, and all they ever did was look at my Irish passport. They didn't scan it once. I may have totally missed it, but I don't think so. And they certainly don't know when I leave as I use my US passport to exit.


Sent from my iPad using Early Retirement Forum

 

[Alan]

I've been to Ireland twice this year, and all they ever did was look at my Irish passport. They didn't scan it once. I may have totally missed it, but I don't think so. And they certainly don't know when I leave as I use my US passport to exit.


Sent from my iPad using Early Retirement Forum

If you don't have any Irish connections like an Irish bank account then you possibly can fly under the radar.

In 2011 we entered the UK and rented a place for 7 months, and our UK bank sent me a letter saying that the UK tax authority require banks to monitor activity and they could see from my debit card usage that it appeared I was now resident and I needed to file a tax form explaining why I was not. I had kept good details of time spent in the UK and could show that although we had rented a place from March through October we had only spent 5 months in the current tax year (which starts April 5th each year) and that we had also spent enough weeks out of the country to not meet the UK residency test.

If Irish banks have the same mandate to track debit and credit card usage of their account holders then that would be a way to keep track of folks spending excessive time in the country.

To the OP I would recommend either seeking professional help or spending a lot of time on expat forums to learn about the tax consequences of living in Ireland. It may be worth it but go into it knowing all the ins and outs otherwise it could turn out to be very expensive.

 

[Sunset]

How about just visiting for 139 days each year, that is just over 4.5 months.

And if you went in the last 139 days of a year, and stayed for the first 139 days in the next year, you would have nearly 9 months continuous there.
Then return to the US for the rest of the second year, and go back for another 139 days in the 3rd year.

 

[Sunset]

....The general principle is that you won't be taxed twice, but you will pay the larger of the two tax bills and you just have to know how much to pay to each country and how to claim credits. There might be some special rates for SS, pensions and dividends and you will have to read the US/Ireland tax treaty to see exactly how to mesh the two systems.

While that is the general principle, it does not really work all that well in practice so a person should expect to be double taxed on a small bit of the income.

 

[Sunset]

How about just visiting for 139 days each year, that is just over 4.5 months.

And if you went in the last 139 days of a year, and stayed for the first 139 days in the next year, you would have nearly 9 months continuous there.
Then return to the US for the rest of the second year, and go back for another 139 days in the 3rd year.

I re-read, and now I think I understand.
You want to do this so your wife can have dual citizenship? Why besides dual citizenship bragging rights ?

 

[Bedraggled]

Thanks, all. Good info.

It may be bragging rights on dual citizenship. DW could have gotten Irish citizenship 10 years ago but I did not pursue the issue quickly and, therefore, only received citizenship for me. That stills stings. So, paying extra taxes and having an Irish adventure may be worth it.

Might it be appropriate for DW to file an Irish tax return "married filing separate?" I must think about that. Her presence in Ireland must be documented to indicate fulfillment of the 3 year requirement but maybe I can "goof off." DW can leave Ireland 2 weeks every 3 months for vacation or family situations but I may have no restrictions. My lack of restrictions, though, may increase total costs in the "adventure."

As it is 4:25AM Christmas morning, I may think of more ways to respond later.

Thanks again. This has been helpful- more than I expected.

 

[theOAP]

A very general article, and not specific to Ireland, which appeared in the Wall Street Journal two weeks ago:

Six Financial Mistakes People Make When Retiring Abroad

1. Closing US accounts
2. Failing to investigate firms policies
3. Failing to shop for best deals
4. Failing to file US income tax returns
5. Failing to budget for double taxation
6. Failing to file tax disclosures

Six Financial Mistakes People Make When Retiring Abroad - WSJ

If you don't have a WSJ subscription, you may have to use the google news workaround.

 

[Bedraggled]

Thanks, theOAP.

I will get to it later. We still have not op[ened the gifts @ 10:12AM here in NYC.

 

[nun]

While that is the general principle, it does not really work all that well in practice so a person should expect to be double taxed on a small bit of the income.

Well there might be some tax free items in one country that will be taxed in the other, but the assumption should be that you will pay the higher of the two tax bills.

 

[nun]

Without auditing you and looking at airline tickets or whatever, how do they know you have been there for 183 days. In fact how so they even know you're there at all? They don't seem to track me when I enter, I.e., stamping my passport etc.


Sent from my iPad using Early Retirement Forum

Tax fraud is a serious crime. If you are resident in a country it is your responsibility to comply with the tax law, just like it's up to you to file as a US citizen.

 

[kcowan]

Tax fraud is a serious crime. If you are resident in a country it is your responsibility to comply with the tax law, just like it's up to you to file as a US citizen.

I should mention that this only applies to US citizens. Those of us from other countries are free. We pay taxes where we choose to live.

 

[nun]

I should mention that this only applies to US citizens. Those of us from other countries are free. We pay taxes where we choose to live.

The US is strange in that is taxes based on income sources, residency and citizenship. Other countries don't tax based in citizenship. However, you can easily have tax liabilities in multiple places depending on your residency and the source of your income.

 

[kcowan]

The US is strange in that is taxes based on income sources, residency and citizenship. Other countries don't tax based in citizenship. However, you can easily have tax liabilities in multiple places depending on your residency and the source of your income.

Yes but if you avoid having assets in the US, life is much simpler. It is only the US that cares about such things. In 2002, we decided to avoid the US entirely for snowbirding, and we have been proven right in that decision. Even we never imagined how bad it could be!

(And the US does not only tax on citizenship or residency. It taxes on anyone who can be classified as a "US Person" which goes well beyond citizenship or residency! Only country in the world to do it so far. I hope it stays that way!)