Slash the tax bill
Hang on to more of that elusive pay packet by claiming tax allowances and credits, and being aware of other measures to ease Budget burdens, writes Charlie Weston
Commuter tickets bought through your employer are bought before income tax is imposed. Duncan Stewart and Jenny Lee Masterson celebrate being able to cut the cost of commuting by up to 47pc with the Bus Eireann Employer Pass Ticket
THE Budget last week was a stinker, with middle and one-income families set to be hit hardest from the measures.
Taxpayers will be reeling from next month when they are hit with a doubling of the income levy, a doubling of the health levy (which is usually listed under PRSI on wage slips) and the loss of mortgage interest relief for those who are not first-time buyers.
The crisis Budget was so severe that higher earners will now pay in excess of 50pc of their income when taxes and levies are combined.
That's the bad news. The good news is that there are some measures you can take to lessen the tax load. Claim your allowances:
Medical expenses
You can get 20pc of the money you spent on health expenses this year, but 41pc of what you spent last year, if you are a higher rate taxpayer.
This 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 are claiming medical expenses for 2007 or 2008, and you are a higher rate taxpayer, your claim should be granted at 41pc. Expenses of €400, will generate €164 in a cheque from the taxman. If the same amount of money is claimed this year, you will only get €80 back.
If you incurred medical expenses in 2005, 2006, 2007 or 2008 you can claim tax relief on these, but they must be claimed before the end of 2009, according to Adrian Farragher of tax advisory firm Mazars.
Service charges
Income tax relief is available for individuals who pay local authority and other service charges. Relief is given for service charges paid in full and on time in the previous calendar year.
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.
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.
Childminding relief
Where a person minds up to three children in their own home, no tax will be payable on the childminding earnings, up to a limit of €15,000.
Trade unions
Tax relief is available at the standard rate on subscriptions paid to trade unions up to a maximum of €350, which means a tax credit of €70 for someone who pays this much.
Home carer's credit
The home carer's credit of €900 in 2008 and 2009 may be claimed by a married couple where the husband or wife cares for one or more dependent children.
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.
Neither is the tax credit available to married couples with combined incomes over €44,400 in the tax year 2008 and €45,400 in the tax year 2009 and who claim the increased standard rate tax band for dual income couples.
Tuition fees
Tax relief at the standard rate of tax (20pc) in the tax years 2008 and 2009 is available for certain tuition fees.
The maximum limit on such qualifying fees for the academic years 2008/2009 and 2009/2010 is €5,000.
Income levy exemptions
The income levy will not apply to those earning less than €15,028 from May. It does not apply to the over 65s with annual income of €20,000, or €40,000 for a couple. Nor does it apply to medical card holders and social welfare payments.
Get the dates right
It's not widely known that PAYE income is taxable when it is earned.
If payments are received in 2009 but were earned in 2008, a claim can be made to ensure such payments are taxed in 2008.
This way you escape the increases that apply for 2009, according to accountant Cathal Maxwell of www.paylesstax.ie.
Income in 2008 was not subject to the income levy, while income generated from May of this year is now subject to a doubling in the income tax.
This particularly applies to bonus payments that may have been earned in 2008 but were not paid until 2009.
Self-employed people should "time apportion" income earned this year. In other words, when making a tax return clearly indicate which month the income was earned, Mr Maxwell said.
This is to ensure that money earned in, say, February, is subjected to a lower income and health levy than money earned after May.
Tax refund
If you paid tax since January 1 last and are now unemployed, you may be entitled to a tax 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) which should have been given to you by your former employer, according to the 'TAB Guide to Money, Tax and Pensions'.
- For more information see www.revenue.ie and search for tax credits and reliefs.
