Everything You Need to Know About Ireland Taxes for US Expats
- Living as an Expat in Ireland
- Ireland at a Glance
- US Expat Taxes in Ireland
- Who Has to File Taxes in Ireland?
- Who Qualifies as a Tax Resident in Ireland?
- What Types of Taxation Does Ireland Have?
- Does the US Have a Tax Treaty with Ireland?
- Does Ireland Have a Totalization Agreement with the US?
- What Tax Forms Do Americans Living in Ireland Have to File?
- Navigating Tax Compliance for US Expats in Ireland
Living as an Expat in Ireland
Ireland is known for its scenic, sprawling landscape, long and storied culture, and beautiful coastlines. It is an excellent place to work or to make your permanent post-retirement home. That is why thousands of US expats have chosen to uproot and relocate to Ireland.
Whether you have decided to stay in Ireland indefinitely or made your way there for work, you will still need to pay certain taxes — most notably income tax. You may not realize that you will also be obligated to continue paying US income taxes even though you are out of the country.
The United States engages in what is known as citizen-based taxation. This means that all US citizens must pay taxes on all worldwide earnings, no matter where they live. The same rule applies to US green card holders.
Whereas the United States has a citizen-based taxation model, many nations use a residency-based taxation model. This model taxes people based on their residency status instead of their citizenship status.
For instance, if you meet Ireland’s residency requirements, you are subject to the same taxes as an Irish citizen. On the other hand, if you do not meet residency requirements but are still living in Ireland, you have to pay income taxes only on earnings generated in the country.
While the thought of filing taxes twice might seem overwhelming, you can navigate both nations’ tax filing processes using the information in this guide from Greenback Expat Tax Services. We cover everything you need to know about Ireland Taxes for US expats and Americans working abroad.
Ireland at a Glance
- Primary Tax Form for Residents: Form 12
- Tax Year: January 1 to December 31
- Tax Deadline: April 30th
- Currency: Euro
- Population: 5 million
- Number of US Expats in Ireland: Approximately 600,000
- Capital City: Dublin
- Primary Language: Irish (Gaelic)
- Tax Treaty: Yes
- Totalization Agreement: Yes
US Expat Taxes in Ireland
The most important thing to know about expat taxes is that you must file them. As a US citizen, you are required to file an annual United States tax return no matter how long you have lived in Ireland. You will also need to file a return with the Irish government.
Both nations adhere to a standard tax year, which mirrors the calendar year. This means that the US and Ireland calculate your tax liability using your income generated between January 1st and December 31st in a given tax year.
Who Has to File Taxes in Ireland?
Ireland requires citizens, residents, and certain non-residents to file annual tax returns. All parties must file taxes by the annual deadline, which falls on the last day of April.
Ireland taxes all three of these groups using the same standard brackets referred to as “tax rate bands” under Irish tax law. Standard tax rate bands are taxed at a rate of 20%. All earnings above the standard tax rate band threshold will be taxed at a higher rate of 40%.
Tax rate bands vary based on a person’s personal circumstances. For the 2022 tax year, the tax rate bands are as follows:
- Single Person: 36,800 Euros
- Married Couple with Only One Income: 45,800 Euros
- Married Couple with Two Sources of Income: 45,800 Euros plus an increase of up to 27,800 Euros
Suppose you are a single person who made 50,000 Euros in Ireland in 2022. In this scenario, the first 36,800 Euros of income would be taxed at the 20% rate, and everything above that threshold would be taxed at 40%. Easy enough, right?
But what if you are married or in a civil partnership? That’s where things can get complicated.
If only you work and your partner has no income, your income band would increase to 45,800 Euros. Any income up to the 45,800 limit would be taxed at 20%; all remaining income would be taxed at the higher 40% rate.
However, if you and your spouse work, your tax rate band would increase by up to 27,800 Euros. If your spouse’s income is less than 27,800 Euros, your tax rate band will rise by that lower amount.
For example, if your spouse made exactly 28,000 Euros, your tax band would rise from 45,800 Euros to 73,600 Euros (45,800 + 27,800). On the other hand, if they made just 25,800 Euros, your combined tax rate band would only increase to 71,600 (45,800 + 25,800) Euros.
In these examples, up to 73,600 or 71,600 Euros, respectively, would be subject to the lower tax rate.
Make sure to calculate your tax rate band correctly, as doing so can maximize your savings and reduce how much of your income is taxed at the 40% rate.
Who Qualifies as a Tax Resident in Ireland?
With Ireland’s unique tax band system covered, let’s look at something a little simpler: residency status. Ireland’s method of determining residency for tax purposes is relatively straightforward. You will be considered an Irish tax resident if:
- You reside in Ireland for 183 days or more during one calendar (tax) year, or
- You have spent a total of 280 days or more in Ireland over the last two tax years
When using the second metric to determine residency status, the Irish government will consider how much time you have spent in the country over the previous two calendar years.
For instance, suppose that you spent 140 days in Ireland in 2021 and 2022. In 2021, you are not considered a resident since it was your first year in the country, and you did not meet the 183-day requirement. However, in 2022, you will be deemed a resident for tax purposes.
Conversely, suppose that you spent 250 days in Ireland in 2021 and just 30 days there in 2022. In this example, you would be a resident in 2021 but not 2022. Even though you meet the two-year 280-day requirement, Irish tax law does not classify expats as “tax residents” if they spend 30 days or fewer in the country during a given tax year.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
What Types of Taxation Does Ireland Have?
Ireland’s primary form of taxation is the aforementioned income tax. The income tax is assessed using the standard Pay As You Earn (PAYE) system, which means that income taxes are deducted from employees’ wages before they are paid.
Ireland also has capital gains taxes, sales taxes, and other miscellaneous forms of taxes. Ireland’s most notable tax other than income tax is its Social Insurance tax. Social Insurance is Ireland’s version of the Social Security program. Social Insurance tax rates are applied to all eligible wages at a standard rate of 4%.
What Is the Tax Rate for Foreigners in Ireland?
The income tax rate Ireland charges foreigners is identical to the bracket used to tax residents’ income. There is a significant difference between how foreigners and tax residents are taxed involves which sources of income are subject to taxation.
Tax residents and citizens must pay income tax on all sources of income generated worldwide. Conversely, foreigners in Ireland have to pay taxes only on Irish-source income and foreign employment income from duties performed in Ireland.
Does the US Have a Tax Treaty with Ireland?
Yes, there is an Ireland-US tax treaty. The tax treaty helps to prevent double taxation, ensuring that individuals are not taxed twice on the same income. The provisions of the tax treaty also allow for certain tax credits to be claimed on US tax returns, which can help to reduce the amount of tax owed to the US government.
Furthermore, the tax treaty between the US and Ireland covers a wide range of tax-related matters, such as income tax, estate tax, and gift tax. This means that individuals who are subject to these taxes in both countries can benefit from the provisions of the treaty.
Does Ireland Have a Totalization Agreement with the US?
Yes, there is also an Ireland-US totalization agreement. This agreement lays out which system you are covered under and which program to pay into. The Ireland-US totalization agreement prevents you from having to pay into the US Social Security program and the Irish Social Insurance program.
What Tax Forms Do Americans Living in Ireland Have to File?
Every American who earns an income, whether living abroad or in the United States, needs to file a form 1040. As an expat in Ireland, you may also need to file forms such as:
- Form 5471 (contains information regarding ties to certain foreign corporations)
- Form 8938 (statement of specified foreign assets)
- Form 1116 (foreign tax credit)
- Form 2555 (foreign earned income exclusion)
The specific forms you need will vary based on your individual income sources and financial situation. The forms you are most likely to need include form 1116 and form 2555. The former is used to obtain your foreign tax credit, and the latter enables you to claim your income exclusion.
Navigating Tax Compliance for US Expats in Ireland
Filing taxes as a US expat in Ireland can be complicated due to various credit and liability reduction programs and different tax bracket systems. Avoid overpaying by partnering with Greenback Expat Tax Services, the premier tax service for US expats. Our team will help you navigate the complex tax laws of both countries, limit your liability, and prevent overpayment.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.