Charlie Weston's 'Beat the Budget': 10 ways you can save with a few simple changes
Tomorrow’s Budget is not expected to deliver much relief to hard-pressed taxpayers. However, a series of measures can ensure your family pay less tax in the coming months
PUTTING money into a pension is one of the most tax-efficient investments you can make, whether you are self-employed or an employee, according to Brian Keegan, director of taxation at Chartered Accountants Ireland.
Premiums paid by an employee to a Revenue-approved pension scheme, or by a self-employed person under a retirement annuity contract, are allowed as an income tax deduction in the calculation of an individual’s income tax liability.
You get relief at your top rate of income tax. Of course, there are restrictions. The maximum allowable deduction depends on both your age and your earnings, and there are special rules for calculating the earnings limits. In general, there is an annual earnings cap of €115,000.
2) Home Renovation Incentive (HRI)
IF YOU are improving your home, you may be entitled to claim an income tax credit of 13.5pc of the money you spend on painting and decorating, plastering, plumbing, tiling, extensions and garden landscaping.
Landlords may also be able to claim a tax credit under this incentive. It can be claimed on expenditure over €4,405 up to a maximum of €30,000 (before VAT) spread over two tax years. Some conditions apply, the main one being the contractor must submit details of the work done via the Revenue online HRI system before you can make the claim.
The relief is expected to run out at the end of 2018.
3) Medical expenses
YOU can claim relief as a tax credit for medical expenses paid by you for yourself or for others. Where you pay for someone else, you don’t have to be related to them.
Expenses that qualify for the relief include doctors’ visits, consultants’ fees, prescription medicine, physiotherapy, and routine maternity care. Some expenses incurred abroad, including certain travel costs, can also qualify.
The tax credit is 20pc of the amount of medical expenses incurred that have not been reimbursed, so you can’t include refunds by the likes of VHI, Irish Life Health, or Laya Healthcare.
4) Rent a room
PEOPLE who rent out one or more rooms in their home can take in up to €14,000 each year free of tax.
The limit also applies to money you get for food, laundry or similar goods and services, so student digs are covered. The relief applies on the gross amount you receive, before deducting any amounts for your own expenses. But beware of going over the €14,000 limit. If you do, the entire income is taxable, Dr Keegan said.
5) Work expenses
REVENUE has arrangements in place to grant “flat-rate” expenses for employees working in a range of activities. Nurses, optometrists, panel beaters, grooms, musicians, journalists and air crew, to name just a few, may claim for a fixed amount provided certain conditions are met.
6) Dental expenses
THERE is tax relief for some dental treatments. Only non-routine ones qualify such as crowns, veneers and orthodontics. Routine checkups and fillings unfortunately don’t qualify. Just like medical expenses, the tax relief is by way of a tax credit equal to 20pc of the amount paid, excluding any amounts reimbursed.
Therefore, if you spend €1,000 to have a crown this year you could claim relief of €200 from Revenue.
7) Nursing Home
THOSE paying nursing home fees can claim at their highest rate of income tax (40pc) if they paid charges to a home that provides 24-hour care on-site. This applies to the taxpayer or for money spent on behalf of somebody else during the year. Any amounts paid over and above the Fair Deal Scheme are also allowed at your highest rate of income tax.
8) Dependent relative
PEOPLE who care for a relative unable to look after themselves independently due to old age or illness may qualify for the Dependent Relative Tax Credit, currently worth €70 off your tax bill.
This cannot be claimed if the relative’s income exceeds €14,753. If there is more than one claimant, the credit is shared based on the amount each contributes. You can also claim credit for any medical expenses paid for your dependent relative, Dr Keegan said.
9) College fees
IF YOU are going to third level, or funding someone, you may be able to claim tax relief at 20pc for tuition fees. This is as long as the fees are fully paid and don’t exceed €7,000 per annum per student. The relief applies to tuition only – it does not cover administration, examination, accommodation or registration fees.
It isn’t available if part of the tuition is funded by a grant, scholarship or employer. If fees are paid in instalments, tax relief can still be claimed once paid. Each claim (not each course) is subject to an annual disregard amount of up to €3,000. If you have paid fees for more than one student, you only subtract the disregard amount once from your annual claim, Dr Keegan said.
Revenue publishes a list of colleges and courses eligible on Revenue.ie and it also publishes some examples of how to calculate the claim.
10) Annual gift exemption
ANYONE who receives a gift from another person may be subject to capital acquisitions tax of 33pc. However, every individual is entitled to receive gifts to the value of €3,000 from another person every year without any tax consequences. For example, each parent can gift up to €3,000 a year in cash to a child to help them build up some savings.