How Ireland Taxes a US Life Annuity When You Retire There (2026)

Written by Hans Goldstein, EA, licensed insurance agent · CA 4273294
Admitted to practice before the IRS
Updated October 2026

I sell annuities and I am an Enrolled Agent, admitted to practice before the IRS. I do not give Irish tax advice. This page lays out what the Irish statute, Revenue's own guidance and the US-Ireland treaty say, with the source and the date I checked each rule, so you can take a clean question to an Irish adviser.

How Ireland taxes a life-only annuity paid to a resident

Take a non-qualified, life-only immediate annuity (SPIA) bought with after-tax money. Section 788 treats a purchased life annuity as containing a capital element that is not an annual payment, so it is not taxed; only the rest is income (TCA 1997 s.788(3), checked 18 Oct 2026). The proportion is the same for every payment and equals the purchase price divided by the actuarial value of the payments, by prescribed mortality tables and without discounting (TCA 1997 s.788(4)-(5), checked 18 Oct 2026). Revenue's guidance gives the same formula and says the value is "the total amount of the payments expected to be made" (Revenue Notes for Guidance, Part 30, checked 18 Oct 2026).

Like the UK, the share is fixed for life, so it does not stop when you have got your money back; the US exclusion does. Does section 788 reach a US insurer? Its definition asks for a life annuity granted for money in the ordinary course of a business of granting annuities on human life, and says nothing about an Irish insurer (TCA 1997 s.788(1), checked 18 Oct 2026). Revenue's notes add that the capital element is determined by the inspector, with a right of appeal, and that when a payer has not been notified of the capital element it deducts tax on the full payment and the annuitant claims the repayment (Revenue Notes for Guidance, ss.788-789, checked 18 Oct 2026). A US payer deducts no Irish tax, so you would declare the income yourself and ask Revenue to fix the share. I did not find a Revenue ruling on a US contract, so treat that step as unsettled.

The notes also exclude annuities bought out of pension assets (an approved retirement fund, an approved minimum retirement fund or a PEPP) (Revenue Notes for Guidance, s.788(2), checked 18 Oct 2026). This page is about after-tax money only; an annuity funded from an IRA is a different question.

Rates. For 2026 a single person pays income tax of 20% on the first €44,000 and 40% above it (PwC Ireland, reviewed 5 Aug 2026, checked 18 Oct 2026). The Universal Social Charge (USC) for under-70s is 0.5% on the first €12,012, 2% to €28,700, 3% to €70,044 and 8% above, with income under €13,000 exempt; from age 70, with income of €60,000 or less, the top USC rate is 2% (PwC Ireland, other taxes, checked 18 Oct 2026). Budget 2027 raises the single standard-rate band to €46,500 and the 2% USC band to €30,300 from 1 January 2027 (Citizens Information, Budget 2027, checked 18 Oct 2026). If you are 65 or older, total income up to €18,000 (single) is exempt from income tax (PwC Ireland, checked 18 Oct 2026), but the exemption does not cover USC (Revenue, age exemption, checked 18 Oct 2026).

The remittance basis: tax only on what you bring in

Foreign income of an Irish resident who is not Irish-domiciled can be assessed on the sums received in the State, not on what arises abroad. Revenue's manual, last reviewed May 2026, says the alternative basis is available to an individual who satisfies Revenue that he or she is not domiciled in the State, for income from foreign securities and possessions taxed under Case III (Revenue TDM 05-01-21A, checked 18 Oct 2026). PwC confirms it for 2026: a resident but non-domiciled person is taxed on foreign income only to the extent it is remitted into Ireland (PwC Ireland, checked 18 Oct 2026). Most US citizens arriving in Ireland are not Irish-domiciled.

What I did not verify is whether Revenue treats a life annuity from a US insurer as a "foreign possession" for this purpose. The payer is foreign and the income is foreign, so the fit looks natural, but get an Irish adviser's written view. If it applies, leaving the check in a US account and spending other money in Ireland would keep Irish tax at zero; any amount you send to Ireland is taxed. The treaty has its own remittance clause in Article 24(6), which limits treaty relief in one state to the amount remitted to or received in the other where that state taxes on a remittance basis (US-Ireland treaty, Art. 24(6), checked 18 Oct 2026).

DIA and MYGA: what changes

DIA (deferred income annuity). Once payments start, a life-only DIA is treated like the SPIA above: one fixed capital share and the same open question on how Revenue fixes it. During the deferral years nothing is paid.

MYGA or other deferred annuity. It becomes a purchased life annuity only when it pays a life income. Before that, Ireland has a separate exit tax regime for gains on certain life policies (Revenue Notes for Guidance, Part 26, checked 18 Oct 2026). I could not verify whether a US MYGA falls inside it, is taxed on withdrawal under another heading, or is taxed as it accrues. Treat that as unsettled and get an Irish adviser's written view before buying a deferred contract with an Irish move in mind.

Treaty: Article 18(2) and the foreign tax credit

Article 18(2) says annuities derived and beneficially owned by a resident of one state are taxable only in that state, and defines annuities as a stated sum paid periodically at stated times during a specified number of years, or for life, in return for adequate and full consideration (US-Ireland treaty, Art. 18(2), checked 18 Oct 2026). The words "or for life" cover a life-only SPIA. Ireland, as your state of residence, has the first treaty right to tax it.

The saving clause in Article 1(4) lets the US tax its citizens anyway, and Article 1(5)(a) keeps Article 24 working for them. Article 24(3) applies where a US citizen lives in Ireland. Ireland credits only the US tax a non-citizen could be charged on the item, excluding tax imposed solely by citizenship, which is nothing here. The US then credits the Irish tax paid, and treats the income as Irish-source to the extent necessary to avoid double tax (US-Ireland treaty, Arts. 1(4)-(5), 24(3)(a)-(c), checked 18 Oct 2026).

Who taxes first, and does it cancel out? A $500,000 example

Assumptions, all illustrative: a US citizen, age 65 at the start, pays $500,000 of after-tax money for a non-qualified life-only SPIA. I assume a 7.0% payout, $35,000 a year (illustrative, not a quote). US side: the IRS multiple at 65 is 20.0 (IRS Pub 939 Table V, checked 18 Oct 2026), so the expected return is $700,000, the exclusion ratio is 71.4%, $25,000 a year is excluded and $10,000 is taxable until the $500,000 is recovered, about year 20; after that all $35,000 is taxable (26 U.S.C. 72(b)(1)-(2), checked 18 Oct 2026). I assume a 22% federal bracket, which for 2026 covers taxable income of $50,400 to $105,700 for an unmarried person (IRS Rev. Proc. 2025-32, Table 3, checked 18 Oct 2026). Ireland side: I use the same $10,000 as the taxable income element (the IRS multiple stands in for the Irish mortality table, which I did not obtain), and assume 20% income tax plus 2% USC, 22% in all, with the slice inside the 20% and 2% bands (PwC Ireland, checked 18 Oct 2026) and (PwC Ireland, USC, checked 18 Oct 2026). I ignore state tax, other US taxes and exchange rates, and show everything in dollars.

The total is the higher of the two taxes. At 22% the two taxes match and the credit wipes out the US bill; at 42% the Irish tax dominates and $2,000 of it gets no US credit, because the credit stops at the US tax on that income. From year 21 (age 85) the US taxes all $35,000, which is $7,700 at 22%, while Ireland still taxes its fixed $10,000 slice; the Irish tax of $2,200 is credited and the total is $7,700. If you start at 70 instead, the IRS multiple is 16.0, so on the same $35,000 the exclusion is $31,250 and only $3,750 is taxable in the US; a real age-70 payout would be higher. If the annuity is your only income, the over-65 exemption could take the income tax to zero, but USC would still apply.

Wealth tax, inheritance tax and leaving

Ireland has no net wealth tax on individuals (PwC Ireland, other taxes, checked 18 Oct 2026). Its inheritance and gift tax is Capital Acquisitions Tax (CAT), paid by the person who receives. The rate is 33% (KPMG Ireland, Budget 2027, checked 18 Oct 2026), above a tax-free threshold that depends on the relationship between giver and receiver. Budget 2027 raised the Group A threshold from €400,000 to €420,000, Group B from €40,000 to €44,000 and Group C from €20,000 to €22,000 for gifts and inheritances taken on or after 7 October 2026 (Citizens Information, Budget 2027, checked 18 Oct 2026).

A gift or inheritance is within CAT when the giver or the receiver is Irish resident or ordinarily resident. A person who is not domiciled in Ireland counts as resident only after 5 consecutive years of Irish residence (CATCA 2003 s.6(4), checked 18 Oct 2026) and (s.11(4), checked 18 Oct 2026); Revenue's notes say the same (Revenue CAT Notes for Guidance, checked 18 Oct 2026). So a new US arrival who dies in the first years leaves non-Irish assets outside CAT unless the receiver is Irish resident and long enough there. I found no exit tax that reaches an annuity contract. US citizenship-based tax stays whatever you do.

Return of premium and the refund feature

A refund feature cuts the check by about 5% in my model and adds a death benefit. From what I verified:

• Income tax during life. A right to a return of premiums is not treated as a separate matter from the annuity (TCA 1997 s.788(5)(a), checked 18 Oct 2026). Revenue's example: an immediate annuity plus the return on early death of the unpaid balance of the price means the entire consideration is treated as paid for the annuity. A fixed lump sum payable on death at any time would need the price apportioned (Revenue Notes for Guidance, s.788(5), checked 18 Oct 2026). A cash-refund feature, which returns unpaid premium, looks like the first case; I did not find a ruling on a US contract.
• The refund itself. Whether a refund paid to an heir is income tax free as a return of capital is not settled in what I verified. As an inheritance it can be in CAT, subject to the residence rules above.
• Wealth tax. None, so the refund value adds nothing to a wealth-tax base.
• US side. IRS Publication 939 says a refund feature reduces your investment in the contract by its actuarial value, which trims the exclusion (IRS Pub 939, refund feature, checked 18 Oct 2026).

The dollar

The annuity pays dollars and your costs are in euros. Federal Reserve H.10 daily data pulled 18 Oct 2026 (FRED DEXUSEU, inverted, checked 18 Oct 2026) show euros per dollar between 0.62 (22 Apr 2008) and 1.04 (27 Sep 2022) over the last 20 years, and 0.89 on 9 Oct 2026. On a $35,000 check that is about €21,900 at the low, €36,400 at the high and €31,300 on 9 Oct 2026. No prediction. A home or other assets in euros offset it.

How to use this

I am a US-licensed insurance agent and can only help while you still live in the US. I am also an Enrolled Agent, admitted to practice before the IRS. If you are weighing an Irish move, run the US side with me before you buy, and have an Irish adviser confirm in writing how Revenue will fix the capital element for a US contract and whether the remittance basis applies to it. This is education, not tax advice.

Frequently asked questions

Related reading

• Moving abroad on a fixed income: the hub
• Where a US annuity is tax-smart abroad
• How Europe taxes a US annuity
• Ireland Stamp 0 income requirement
• Wealth tax by country and US annuities
• The exclusion ratio abroad
• UK: US annuity tax for retirees

Sources

• IRS: US-Ireland income tax convention, Articles 1(4)-(5), 18(2), 24(3), 24(6)
• Taxes Consolidation Act 1997 s.788: capital element in certain purchased annuities (as enacted)
• Revenue Notes for Guidance, TCA 1997 Part 30 (Finance Act 2025 edition), s.788 and s.789
• Revenue Tax and Duty Manual 05-01-21A: the remittance basis of assessment (reviewed May 2026)
• PwC Worldwide Tax Summaries: Ireland, taxes on personal income (reviewed 5 August 2026)
• PwC Worldwide Tax Summaries: Ireland, other taxes (USC, no net wealth tax, CAT)
• Revenue: Income tax exemption and marginal relief for people aged 65 or over
• Citizens Information: Budget 2027 (standard-rate band, USC, CAT thresholds)
• KPMG Ireland: Budget 2027 tax summary (CAT thresholds, CAT rate stays at 33%)
• Capital Acquisitions Tax Consolidation Act 2003 s.6: taxable gift, 5-year residence rule for non-domiciled persons
• Capital Acquisitions Tax Consolidation Act 2003 s.11: taxable inheritance
• Revenue Notes for Guidance, CAT Consolidation Act 2003 (to Finance Act 2024), Part 3
• Revenue Notes for Guidance, TCA 1997 Part 26 (life assurance exit tax regime)
• 26 U.S.C. 72 (annuities; exclusion ratio in 72(b))
• IRS Publication 939 (12/2025): Table V expected return multiples, refund feature rules
• IRS Rev. Proc. 2025-32: 2026 tax rate Table 3 (22% bracket $50,400 to $105,700, unmarried)
• Federal Reserve H.10 via FRED: US dollars per euro (inverted to euros per dollar), 2006 to 2026