In general Social welfare payments (Deasp) are taxable unless they are specifically exempt from tax. These payments are not subject to PRSI or USC.
The following Social Welfare Payments are not liable for tax:
- Jobseekers allowance
- Farm assist
- Supplementary allowance
- Disability allowance
- Domiciliary Care Allowance
- Child Benefit
- The Back to Work Allowance
- The Back to Work Enterprise Allowance
- Back to Education allowance
The following Social Welfare Payments are liable for tax:
- Illness benefit ( Child dependent amount is not taxable)
- Adoptive benefit
- Health & safety benefit
- Job seekers benefit
- Death Grant
- Family Income Supplement
- Rural Social Scheme ( RSS)
- Community Employment Schemes (CES)
- State Pension
The following Social Welfare Payments are taxable and you are obliged to declare same to the Revenue.
- Carer’s allowance
- Blind Persons Pension
- Widow’s Pension
- Deserted Wife’s allowance/benefit
- Short Term Enterprise allowance
No tax is deducted at point of payment. This can lead to substantial tax underpayments for people. If you have other income e.g. An Occupational Pension, which uses up all of your tax credits then the State Pension is liable for tax in full. Many people are not aware of this and if it is left uncorrected for a number of years a very substantial tax liability can arise.
If you are in receipt of the Old Age Pension you are entitled to the normal PAYE tax credit. This is an important point for people who have been self-employed all their life and never in receipt of PAYE income. When you start drawing the State pension you are entitled to claim the benefit of the PAYE tax credit.