How to cut your tax bill
Published 27/10/2011 | 05:00
Make sure you know your allowances -- you could get money back from the Revenue, writes Charlie Weston
THESE days, people lucky to be still in a job could be forgiven for feeling that they no longer work for their employer and work for the taxman instead.
Workers have been hit with a swathe of taxes and levies in the past five savage Budgets, going back to October 2008.
The income levy has doubled and has been replaced with the universal social charge. PRSI (pay-related social insurance) is now imposed on more income.
That is the bad news. The good news is that you may well be owed money by the taxman.
Thousands of workers are overcharged by the Revenue every year because they fail to apply for all the tax reliefs to which they are entitled.
Make sure you reduce your tax bill by claiming all your tax credits and reliefs. Who knows? You may even be due a rebate from the taxman.
But be warned. With another severe Budget on the way, these tax credits may not last.
Here are 12 ways to reduce your tax bill
1 Medical expenses
You can get back 20pc of the money you spent on health expenses in a tax year.
This means that if you spent €1,000 on medicines and doctors last year, you could get €200 back.
This tax relief only applies to medical expenses that have not been reimbursed by a private health insurer.
Medical expenses include GP costs, drugs and medicines, hearing aids, home nursing and maternity care, among others.
If you have still to claim medical expenses for 2008 and are a higher-rate taxpayer, your claim should be granted at 41pc. But since 2009, the rate you can claim back dropped to 20pc. Download form Med 1 from www.revenue.ie to claim back medical expenses from last year.
2 Home carer's credit
The home carer's credit of €900 may be claimed by a married couple where the husband or wife works in the home caring for one or more dependant children and where they are jointly assessed.
A tax credit has the effect of reducing your payable tax by the amount of the credit. For example, in the case of the home carer's credit, the first €900 of earnings a year is discarded before tax is applied.
If the home carer earns an income of less than €5,080 they can still claim the full credit. If they have income between €5,080 and €6,880, they can claim a reduced credit. The tax credit is not available to married couples who are taxed as single persons.
3 Service charges
This relief was abolished for this year on but it is still available for the tax year 2011 for service charges due in 2010 and actually paid.
The total that can be claimed for service charges is €400. This is given at the standard 20pc rate of tax. So if you paid €300 last year you will get €60 from the taxman at the end of the tax year. Well worth claiming.
4 Rent a room
Where a room in a person's main residence is let as residential accommodation, gross annual rental income of up to €10,000 in 2008 and 2009 is exempt from tax.
5 Childminding relief
Where a person minds up to three children in their own home, no tax is payable on these earnings up to €15,000.
6 Trade unions
This relief was abolished for 2011 onwards, but you can still claim it for last year if you have not already done so.
Tax relief is available at the standard rate (20pc) on trade-union subscriptions up to €350, which means a tax credit of €70 for someone who pays this much.
7 Tuition fees
From this year, you can no longer claim tax relief for the new student registration change, which has gone up to €2,000.
But if you have more than one child in college you can claim relief on second and subsequent registration charges at 20pc. The maximum relief on such fees is limited to €7,000 a year.
8 Tax refund
If you paid tax since January 1 last and are now unemployed, you may be entitled to a tax refund.
In order to receive this refund you should complete form P50 from the Revenue Commissioners and send it to your local tax office together with your P45 (parts 2 and 3). For more information go online to www. revenue.ie
9 Flat-rate expenses
Many workers are unaware that they are entitled to claim tax credits for expenses incurred in work.
For example, teachers can claim up to €518 a year to cover expense incurred.
A nurse can claim up to €733, a carpenter can claim €220 and journalists can claim €381.
10 Single-parent tax credit
The one-parent family tax credit can be claimed if you are a single mum or dad and you have a child who is dependent on you and resides with you for at least one night in the year.
In addition to children aged 18 or under, you can also receive this for an adult dependent in further education/training and for incapacitated individuals -- in most cases.
You do not qualify for one-parent family tax credit if:
• You qualify for the married person's tax credit.
• You are living together with another person as man and wife.
In Budget 2011, the single-parent tax credit was reduced by 10pc to €1,650.
11 Rent relief
Rent relief is available for rent paid for your primary residence only. It is available if you are renting from a private landlord or a rental agency, but not if you are renting from your parent or from a housing authority.
The amount you can claim depends on your circumstances, but for single people under the age of 55 the rent-relief tax credit for 2010 is €400.
For married people this is doubled to €800, as it is for single people over 55. In the last Budget, it was decided to phase out rent relief and those who were not renting at December 7, 2010 and who subsequently entered into a rental agreement were unable to claim relief.
Perhaps the biggest tax break available to the PAYE worker is the tax relief for investing in a pension.
At its simplest, the tax relief on pensions means that if you pay tax at the 20pc rate then you can get 20pc off the money you put into your pension.
If you are taxed at the higher 41pc rate, then you get tax relief at this rate.
Irish Independent Supplement