How to claim thousands of euro back from the taxman
In the second of a four-part series on shaking up your finances, Louise McBride looks at tax and welfare entitlements
Published 17/01/2010 | 05:00
IF you're one of the hundreds of thousands of taxpayers not claiming your full tax reliefs, you could be losing out on thousands of euro a year. A few simple steps can get you back on the right track.
GET BACK THOUSANDS ON HOSPITAL BILLS
If you or any of your family have been to hospital or the doctor in the last four years, you could get back hundreds if not thousands of euro in tax relief, depending on how hefty your medical bills are.
Some of the medical expenses you can get tax relief on include doctors' and consultants' fees, drugs and medicine prescribed by a doctor or consultant, speech and language therapy, and ambulance transport.
Before 2009 kicked in, you could claim back 41 per cent of medical expenses in tax relief -- however, since January 2009, you can only claim back 20 per cent.
You do not necessarily have to be working to be eligible for tax relief on medical expenses. If you have other earnings and you're paying tax on them, you will usually qualify for tax relief. So if, for example, you're retired but getting a pension on which you are paying tax, you should be entitled to tax relief on medical expenses.
As you can claim tax relief for the last four years, you can get tax relief at the standard rate of income tax (20 per cent) for medical bills paid for in 2009, and at the higher rate of income tax (41 per cent) for bills paid in 2006, 2007 and 2008.
You cannot claim tax relief for medical expenses which are covered by your insurer or which have, or will be, covered by compensation.
REGAIN €2,500 A YEAR ON YOUR MORTGAGE
With mortgage interest relief to be completely abolished by the end of 2017, make sure you're getting back any tax relief you're entitled to between now and then.
If you're a first-time buyer, you could claim back up to €2,500 a year in tax relief (€5,000 if married) on the interest paid for the first two years of your mortgage. In the third, fourth and fifth year of your mortgage, the tax relief could put up to €2,250 a year (€4,500 if married) back in your pocket; in the sixth and seventh year, you can claim back up to €2,000 a year (€4,000 if married). This means that over seven years, first-time buyers could claim back up to €15,750 in mortgage interest relief.
If you're not a first-time buyer, mortgage interest relief is worth up to €450 a year to you (€900 if married).
Remember, mortgage interest relief is not restricted to loans taken out to finance the purchase of your home. If you take out a loan to repair or renovate your home, or to build a driveway or path for your home, you can also claim the relief. If you take out a mortgage to buy a home for a former or separated spouse, or if you have a dependent relative, you will usually qualify for the relief so long as you provide the accommodation rent-free.
If you're selling your home to buy another one, and use a bridging loan to finance this transaction, you can usually claim tax relief on the first 12 months of interest paid on the loan.
Although you cannot claim mortgage interest relief for investment properties, you can claim most of the mortgage interest as an expense against the rent received from that property.
SAVE THOUSANDS BY EMPLOYING THE KIDS
If you work for yourself and have a family, you could save thousands of euro in tax by hiring your spouse and children.
Let's say for example you're self-employed as a sole trader and make an annual profit of €50,000. You're married with two children in their teens and your wife does not earn any income herself. Normally, your tax bill (including PRSI and levies) for the year comes to €10,400, according to Cathal Maxwell, managing director of the tax saving website, paylesstax.ie. However, you could reduce this bill to €3,400 if you pay each of your children a salary of €9,150, your wife a salary of €15,000, and a profit of €16,700 to yourself, says Maxwell.
CUT YOUR NURSING HOME FEES IN HALF
Nursing home fees are one of the few medical expenses where you can still claim tax relief at your higher rate of income tax.
So if you're paying €1,000 a month to send your mother or father to a nursing home this year, and you're a PAYE worker paying 41 per cent tax, you could claim back about €4,920 in tax relief for the fees paid in 2010 alone. As you can claim tax relief for the last four years if you've paid your mum's nursing home fees since 2006, and the monthly fees have consistently been about €1,000, you could also claim a refund of almost €20,000 for the last four years.
GET YOUR TEETH CHECKED FOR FREE
The days of having your PRSI cover the cost of painful fillings and teeth cleaning are now gone -- since the beginning of this month, your PRSI only covers the cost of a dental check up.
However, the benefit (which also extends to free eye tests) shouldn't be sniffed at. A check-up at your dentist could set you back between €70 and €90 if you're not covered by PRSI, while an eye test could cost more than €30.
WATCH TV FOR FREE
If you're aged 66 or more and qualify for a full or reduced state pension (or you satisfy a means test), you may be entitled to a free television licence, and an allowance for your telephone, electricity and gas.
If you think you qualify, these benefits are available from the Department of Social and Family Affairs under the household benefits package.
GET PAID FOR ISLAND LIVING
If you live on Donegal's Tory Island or Galway's Inishmore and you're getting the state pension, make sure you're getting your island allowance.
The island allowance -- paid to those living on certain offshore islands -- will add an extra €12.70 a week (or €660 a year) to your pension.