10 WAYS TO CUT YOUR TAX BILL
Rent A Room Relief:
If you rent out a room (or rooms) in your home to private tenants, the rental income you earn will be exempt from tax up to a limit of €10,000 per year.
You do not have to register with the Private Residential Tenancies Board (PRTB) as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum standards.
In order to claim rent relief, you must be paying rent for private accommodation in your main residence and paying income tax in Ireland. The maximum annual amount that a single person under 55 can get is €240 in tax relief, €480 for a married couple under 55. Rent relief is currently being phased out, and 2017 will be its last year.
Tax relief at the 20 per cent standard rate is available on a wide range of medical expenses for up to four years after you incur them. This means that, when you spend money on medical care that otherwise is not covered by the state or your private health insurance, you can claim some of the money back as a rebate on tax you’ve paid.
The most common expenses covered by the relief are doctors’ fees, consultants’ fees and prescriptions, but hospital treatments and routine maternity care – among other expenses – are also covered. Routine dental and optical treatments are excluded, but procedures such as orthodontic and root canal treatments are covered.
For children with cancer or permanent disabilities, relief is also available for certain expenditures beyond the medical treatment. Receipts must be kept for six years, and given to the Revenue in the case of an inspection.
Flat-rate expenses are incurred while carrying out your duties in employment, and can be deducted from your income before it is taxed. They are directly related to the nature of the employee’s employment.
A standard flat rate for expenses is agreed between the Revenue and representatives of groups or classes of employees (usually represented by trade union officials). The agreed deduction is then applied to all employees of the class or group in question.
For example, nurses who are required to provide and launder their own uniforms are granted a deduction of €733. Teachers are granted a deduction of €518, while the deduction for a Journalist is €381. There are a surprising number of areas and professions that can avail of this tax relief.
Mind a child, claim a tax break:
With Ireland officially boarding the highest birth rate in the EU’s 27 member states, this could be your opportunity to turn the state’s record fertility rate into a cash-cow of your own.
A person who works as a child-minder, taking care of up to three children all of whom are under the age of 18 may be entitled to avail of a special tax exemption which will permit them to earn €15,000 tax-free.
The child-minder must be registered with the tax office and the work must be carried out in the child-minder’s own home and no more than 3 children may be cared for at any time.. However, if the child-minder’s income goes over the tax exemption limit of €15,000, the entire income is liable for tax on the same basis as a normal self-employed person.
The tax exemption is called childcare services relief. Once child-minders have been deemed to qualify for this tax exemption, they will be asked to pay an annual PRSI contribution of 4 per cent on all their child-minding income, or €253.00, whichever is the greater.
The purpose of this PRSI contribution is to go towards the child-minder’s social insurance record and the build-up of pension and other entitlements, such as maternity benefit. Child-minders wishing to avail of the tax exemption should also notify the local county childcare committee that they are providing the service.
Cycle to work, catch a tax break:
If public transport does not appeal to you, there is also an old fashioned bike. In addition to the exercise, there is also a tax incentive – the government introduced a tax-free bike scheme for employees cycling to work.
Using the Cycle to Work scheme, employers can buy a new bike and safety equipment for up to €1,000. Employers deduct the cost of the bike and equipment from the employee’s salary each month. This can lead to savings of up to 52 per cent off the retail price of the bike and equipment. All kinds of bikes, from mountain bikes to hybrids to road bikes, are included in the scheme. It is open to all Irish tax paying employees, both part and full time. The scheme must be operated by the employer.
The scheme has benefits for the employer also in terms of PRSI savings, reduced parking problems, savings in parking tax and healthier, fitter work force.
Get married, get the benefit:
Tax might not be the main reason for a couple to tie the knot, but there are numerous tax advantages for getting married – shared tax credits, CGT benefits on asset transfers, and various other spousal exemptions.
Married and civil partner couples can choose to be taxed in any of three ways – single assessment, separate assessment or joint assessment. Joint assessment option usually works out best. The option is automatically given by the tax office when you advise them of your marriage (or civil partnership), and allows couples to share and allocate their tax credits and standard rate cut-off point to suit their own circumstances.
If only one spouse has taxable income, all tax credits will be allocated to the spouse with the income.
If both have taxable income, they can decide which spouse is to be the assessable spouse.
Couples can choose to use their tax credits in whatever way suits them best. Some prefer to allocate their credits against a spouse’s PAYE income, meaning that their take-home pay is boosted on a regular basis.
In the current climate, it is also worth remembering that, if one of the couple loses their job, the working partner can claim the tax credits for the non-working spouse.
In the year you get married, both you and your partner continue to be treated as single people for tax purposes. However, if the tax you pay as two single people is greater than the tax that would be payable if you were taxed as a married couple, you can claim back the difference.
Tax relief on college education:
If you have one or more children attending college, then the chances are you know all about the value – and cost – of a good education. But there is, literally, some relief from the rising fees and other costs of going to college. Students or their parents can claim tax relief on tuition fees paid for approved undergraduate and postgraduate courses, as well as certain information technology and foreign language courses.
You can claim tax relief as long as you have actually paid the fees, either on your own behalf or on behalf of another person. The tax relief does not cover examination or administration fees, nor indeed any part of the tuition fees which have been covered directly or indirectly by a grant, by an employer or via a scholarship.
Tax relief is given at the standard rate. There is no limit on the number of individuals for whom you can claim.
One Parent Family Tax Credit:
The one parent family tax credit is granted to a single parent who has a qualifying child residing with them for the whole, or part of the tax year. In practice, if a single parent has a child residing with them for even a short period during the income tax year, they will qualify for the one parent family tax credit. This tax credit is not available to a single parent who is living with another person as husband and wife.
Mortgage interest relief:
Mortgage interest relief is based on the amount of mortgage interest you pay in a year. Your mortgage lender gives you the benefit of tax relief at source (TRS) so the lender automatically reduces your mortgage payment by the amount of tax relief you are entitled to each tax year. Mortgage interest relief for first-time buyers in 2012 is 25 per cent for the first and second tax year in which you pay mortgage interest. The rate for tax years three, four and five is 22.5 per cent. After that you will get relief of 20 per cent but 2017 is the last year in which mortgage interest relief will be available.
www.thetaxclinic.ie was founded in February 2010 by Michael Coll & Mabel McHugh. Since then Michael & Mabel have secured vast Tax Refunds for many satisfied customers and are looking forward to many more years of sustained growth.
The Tax Clinic is the only business in the Northwest that specialises in offering services to P.A.Y.E workers. Mabel says that “while working for over 20 years in the financial services sector she noted that there was no professional representation for P.A.Y.E workers”. With this in mind Mabel together with Michael, who are both members of The Irish Taxation Institute set up www.thetaxclinic.ie and have gained a huge reputation in this complex area of taxation.
Mabel works in The Tax Clinic in Main Street Killybegs, while Michael now works in their new premises on the High Road Letterkenny along with The Tax Clinics third partner Noel O’ Donnell who has also located Noel O’ Donnell & Co Chartered Accountants in the same building.
We also offer a cost effective payroll outsourcing service. We can also look after your P.A.Y.E and V.A.T compliance and obligations.
To find out more log onto www.thetaxclinic.ie or call into either the High Road Letterkenny or Main Street Killybegs”