There is a complete exemption from tax subject to certain limits for the long term leasing of farm land. From 2004 onwards the owner of the land must be 40 years of age or over. For earlier tax years the owner had to be at least 55. There is no age limit where the owner is permanently incapacitated. The lease must be in writing and for a definite term and the lessor and lessee must not be related.
There are three different levels of income exemption depending on the length of the lease term as follows: Income Exemption Limits depending on the term of the lease.
term of lease 5 – 7 Years €12,000
term of lease 7 – 10 Years €15,000
term of lease 10 Years + €20,000
Each spouse of a married couple is entitled to their own individual exemption threshold. For the year 2007 onwards a married couple who jointly lease farm land can qualify for income tax exemption on income up to €40,000 per annum.
TAX SAVING TIP
If the farm land to be leased is owned in one name only, consideration should be given to transferring it into joint names to avail of the greater tax relief. This can be done without incurring any tax charges.