Q&A

How do we choose our principal residence?

Q

My fiancee and I are getting married this summer. She bought a first-time house in September 2005 and I bought one in November 2006. Since I presume we will only be able to have one principal residence, will there be any nasty tax suprises lurking in wait? We both work and so have no tax advantage of joint assessment.

- MR S F, EMAIL

A

As you have surmised, you are only allowed to own one principal private residence – ie main home – under tax rules.

The Revenue is not going to penalise you for owning separate properties up to now.

However, once you get married, you effectively own two properties, one of which will be treated as an investment property. Quite simply, this will be whichever property the two of you will not be living in.

Assuming you hold on to the other property, its eventual sale will start to become liable to capital gains tax. Any move to rent it out will leave you liable to income tax.

If you are thinking of selling it, you will effectively have a year from your wedding to do so. This is because the law regards the property as owner-occupied for its final year of ownership for the purposes of capital gains tax, regardless of the reality.

How will widowhood affect my taxes

Q

I am recently widowed and have been sorting out my tax affairs. There is one matter I am having difficulty with. Apparently when one is widowed, the widow/er is entitled to reclaim his/her PRSI contributions back from the date of the death of the spouse and is not obliged to make any further PRSI contributions.

In addition, certain levies, such as the health levies, are not payable.

I am having difficulty in getting information on this point. I am hoping you can get to the bottom of it. There are many people in my situation.

- Ms U McS, DUBLIN

A

Getting to grips with financial affairs following a bereavement can be difficult, and sometimes distressing. Many of us are not used to having the responsibility for such matters.

In this case, I think you may have picked up mixed messages on the issue of PRSI refunds or relief. I have checked with the Department of Social Protection – which deals with PRSI issues – and they assure me that there is no automatic relief from future PRSI contributions simply by virtue of a person being widowed.

Equally, there is no automatic right to a reimbursement of PRSI contributions you may have made since your spouse’s death.

As the Department put it, if people were exempt from paying PRSI, they would not be covered for social insurance benefits, which include jobseeker’s benefit and illness benefit.

Where some confusion may arise is in relation to the health levy. A person in receipt of a widow/er’s pension is not liable for the health levy.

If refunds arise, things get slightly more complicated. If you are self-employed, you will need to contact the Revenue Commissioners about any refund.

However, if you are an employee, you will need to apply to the Department of Social Protection. That application must be made within four years of the year in which the contributions were paid.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com