The effect of separation on each spouse's tax liability depends chiefly on whether there are any maintenance payments involved and, if so, whether these payments are made under a legally enforceable arrangement or not.
If maintenance payments are made, for the benefit of a spouse, under a legally enforceable arrangement during the year in which the couple separates then:
Where a couple separates and no maintenance payments are made, each spouse is taxed as a single person and is responsible for filing his/her own tax return and paying tax on his/her own income.
Voluntary maintenance payments (i.e., payments that are not legally enforceable) are not taken into account when calculating either spouse's tax. This means that:
Where a spouse:
he/she will qualify for the married person's tax credit but only the single person's standard rate cut-off point is due. The other spouse can also claim the single person's tax credit against his/her own income (if any).
"Mainly Maintaining" means that the payer's maintenance payments exceed the recipient's income.
Legally enforceable maintenance arrangements include annual or periodic maintenance payments made under an order of court, deed of separation, rule of court, trust, covenant or any other act that gives rise to a legally enforceable obligation. The maintenance arrangement must be made or carried out in consideration or in consequence of a separation.
Maintenance payments that are made under a legally enforceable arrangement entered into on or after 8 June 1983 are payable without deduction of tax. The following rules apply to maintenance payments made for the benefit of a spouse:
A separated couple can choose to be treated as a married couple for income tax purposes if:
The couple must submit a joint election in writing if they wish to avail of this option. The election must be made in writing before the end of the tax year and must be signed by both parties. If such an election is made, the maintenance payments are ignored, i.e., the spouse making the payments does not get a tax deduction for them and the spouse who receives the payments is not liable for tax on them.
Where both spouses possess income, separate assessment will apply, i.e., tax credits and standard rate cut-off point will be apportioned between the spouses, subject to a review at the end of the year to ensure that any unused tax credit or relevant rate bands are given to the other spouse.
Where only one spouse has income, the full tax credits, reliefs and the maximum standard rate cut-off point (for couples with one spouse working) will be given to that spouse.
For details and examples of the different types of assessment see Taxation of married people and civil partners in Ireland.
Maintenance payments that are made for the benefit of a child or children are ignored for tax purposes:
Each spouse may be entitled to claim an Incapacitated Child Credit (or see Leaflet IT18 (pdf)). The Single Person Child Carer Credit (SPCCC) can be claimed by the person with whom the child or children live for the whole or greater part of the year (more than 6 months) – called the primary claimant. A primary claimant can surrender his or her entitlement to the credit, in favour of a secondary claimant (provided the child (or children) lives with that person for more than 100 days in a year and the person meets all the other qualifying conditions.)
If you are receiving maintenance payments and you also have income that is subject to PAYE, it may be possible to collect some or all of the tax due on the maintenance by reducing your tax credits.
If you are receiving maintenance payments only, the tax due is payable directly in one lump sum under the self assessment procedures. In calculating your finances, you should take into account the payment of any tax that is due and the fact that this amount may have to be paid in one lump sum.
Where a couple obtain an Irish divorce, the provisions as outlined above will apply to any maintenance arrangements made by order of the court, which means that:
A divorced couple also has the option of being treated as a married couple (the separate assessment provisions will apply) for income tax purposes if:
If a marriage is annulled, each spouse will be taxed as a single person from the date of the annullment onwards. The couple cannot make an election for joint assessment.