Employee PRSA contributions are deductible, within limits, for which taxes?

• A. Income tax only
• B. Income tax and PRSI only
• C. USC and PRSI only
• D. Income tax, USC and PRSI

Answer: (D)

Contributions you make to a PRSA as an employee reduce the amount of earnings that are taxable for all three charges, but only up to the annual relief limits. The money you contribute is treated as a deduction from your gross pay for tax purposes, so you get tax relief on income tax at your marginal rate. Because USC and PRSI are calculated from earnings, reducing your gross pay through pension contributions also lowers the USC and PRSI you owe, again within the applicable relief caps.

In short, employee PRSA contributions are deductible for income tax, USC, and PRSI, subject to the relevant annual limits.