Your Money: Making the most of tax benefits
Thousands miss out on tax reliefs and credits each year. Don't be one of them
Just because you have an HR department, don't assume your tax is in order, or that you are claiming everything you're entitled to. Taxpayers have claimed €4bn back from Revenue since 2010 and some of this is inadvertent overpayments. How do you know? What can you do? Here are tips to get your entitlements.
The tax system
The onus to pay the right tax is on you, not Revenue. The same goes for tax relief or credits; nobody is auditing the fact that you are paying health insurance, or have third-level fees that could earn you back money. You have to do it yourself. The first step, says Eileen Devereux of Taxback.com, is to get a P21, or Balancing Statement, from Revenue.
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You can request it through Revenue's My Account online portal. "A P21 is an end-of-year statement and it will set out your income, your tax credits, and the amount of tax/USC you have paid during the year. It will also give you details of any underpayment or overpayment of tax," she said. That's the basis for working out if you're due any refunds from sources outside your income and expenditure.
Revenue also has a new PAYE Modernisation system online, to track all payments and refunds.
Tax credits v Tax relief
Tax relief is when the cost of something is directly reduced, e.g. health insurance premiums are deducted by 20pc to a maximum of €1,000 or, in reality, €200. It's very straightforward to calculate. Some reliefs are given at the 'standard' rate (20pc), others at the 'marginal' rate (40pc). Some are automatic (at source), others you have to apply for yourself. A tax credit is where an allowance is 'given back' to your otherwise taxable income. It is effectively tax you don't pay on a portion of your income due to a specific circumstance, like being a home carer, or over 65.
Common reliefs, credits
- Medical expenses: Any non-imbursed expenses (doctor visits, medicines, special equipment or food, and even the DPS outlay of €134 p.m.) attract tax relief at 20pc. Keep receipts, download the form and apply for the family.
- Home carer: This tax credit is valuable - €1,500 p.a. for any stay-at-home parent with children under 18. Up to 60,000 families miss out because they wrongly believe it's a disability benefit. As long as you don't earn more than €10,200 yourself part-time, your spouse can claim part or full credit.
- Age tax credit: Pensioners can earn more before starting to pay tax than workers. An additional benefit is this credit, worth €245 once you turn 65. It should be automatic, but may not be, so always check.
- Elder care: If you have a loved one in a nursing home or receiving home care for which you are paying, you can claim marginal rate tax relief on it. The person paying the bill gets the relief, which makes it valuable for high-rate taxpayers. Relief on expenditure up to €75,000 p.a. is allowable.
- Tuition fees: Although the first €3,000 is exempt (the 'student contribution'), this is a family limit, so if you have more than one child in full-time third-level education (or, indeed, yourself), you can claim standard rate tax relief on the balance, up to €7,000 p.a.
- Marriage tax relief: Claiming extra tax relief may not be the most romantic thing about getting married, but thousands of couples are missing out if they don't know about the 'year of marriage' relief, says Ms Devereux: "In the year of marriage, both parties are treated as single people for tax purposes. However, if the tax they pay as two single people is greater than the tax payable as a married couple, they can claim the difference as a tax refund."