Tax Exemption on Pension Income Received after 61 years of age

S.L. 123.204 – Pensions (Tax Exemption) Rules seeks to remedy the situation where pension income is taxed under Article 4(1)(d) of the Income Tax Act and as a result, other income earned in the same year is also taxed at a higher personal rate. To overcome this higher tax burden, the Government has implemented steps to ensure that over a span of 5 years all pension income shall be exempt from tax (subject to capping).

This process has now been completed. In fact, as from basis year 2026, pension income is fully exempt from tax up to a substantially increased threshold of € 37,104. This means that the total of any social security pension, service pension, foreign pension, occupational pension and private pension is exempt up to this amount. Besides fully exempting Government pensions, this also encourages the take-up of private and occupational pensions.

This reform also means that as from 2026, other income starts benefitting from the 0% bracket in full, meaning that any income up to the tax -free bracket is also not chargeable to tax. This is an added incentive to pensions who remain in employment or self-employment, but also applies to other income.

One should also note that for a person on the standard married rates, the former “further rebate” remains applicable and this means that any further income up to € 3,600 is eligible for the tax rebate. Essentially, such an individual does not pay tax on any other income up to € 18,600. This tax rebate is computed as follows:

            Rebate = (chargeable income less 15,000) multiplied by 15% [capped at €540]

Pension income derived by an individual on or after 1 January 2022, after the age of 61, shall be partially or fully exempt from tax as follows:

Table 1 – Tax Exemption on Pension Income

New Examples relative to 2026:

Case 1: a pensioner who is single earns a pension of €20,000 and has other income of €12,000. The pension is exempt (below 37,000) and the other income is within the tax-free bracket for single persons (12,000). Therefore the tax for the year is 0.

Case 2:  a pensioner who is chargeable under the standard married rates earns a pension of €20,000 and has other income of another €15,000. The pension is exempt (below 37,000) and the other income is within the tax-free bracket for the standard married rates (15,000). Therefore the tax for the year is 0.

The following examples outline the application of the pension exemptions.

1. Individual Taxpayers in Receipt of Pension Income falling below the Tax Threshold

Table 2 – Income below Tax Threshold

The applicable rate of tax will depend on the individuals’ personal circumstances. Tax rates can be found on the following link. For a single individual, total tax paid shall be as follows:

2. Individual Taxpayers in Receipt of Pension Income falling above the Tax Threshold

Table 3 – Above the Tax Threshold

The applicable rate of tax will depend on the individuals’ personal circumstances. Tax rates can be found on the following link. For a single individual, total tax paid shall be as follows:

3. Individual Taxpayers in Receipt of Pension Income and Other Income

Table 4 – Other Income