We all hate tax, right? So why do so many of us NOT claim money back from Revenue or use clever investment scheme to invest our hard earned cash? There a number of ways revenue get you
- Income tax, PRSI & levies
- Capital Gains tax (tax on your gains from investments)
- Exit Tax (tax on growth when leaving some investments)
- DIRT Tax – Deposits
- Capital Acquisition Tax (CAT) – Tax on your asset when you die (the worst for me)
What if I told you that with a bit of financial planning (not scary) you could reduce and even avoid some of the taxes above. For me Tax should be easy and straight forward, but unfortunately its not, so engaging in the services of people with experience in Tax should be a priority for everyone. Below are some ways to reduce or cut your tax bill.
- EII Scheme – gives investors an income tax deduction on risk investment up to €150,000 per annum in companies that qualify. Initial 30% follow with a top up of 10% IF the company meets employment or R&D targets.
- Pensions – 20% or 40% – This is a complete no brainer for everyone. Pensions are the biggest tax free haven for anyone. You can get involved from as little as €50 per month and can save up to €2million! So no excuses for anyone. Pensions do not need to be complicated. There are basically three parts to a pension
- Getting in (Tax relief of 20% or 40% on contributions)
- Picking an investment for your contributions (there is a risk profile to suit everyone so need to be afraid of this part). Unlike any other investment vehicle pensions have TAX FREE growth – meaning no tax is paid at any stage on your growth.
- Getting out – There a couple of ways to get income out of your pension at retirement age (which can be from ag e 50 in some cases). You get some of your pension as tax free cash and some at your marginal tax rate (20% or 40%) however there are clever ways to draw down your pension depending on your circumstances.
- Employing a carer: Deduction of up to €75K at your highest rate of income tax if you employ a carer to look a family member to is totally incapacitated. Where the cost is shared by family members you can claim a proportion to the amount borne by each.
- Start your own business relief – if unemployed (long-term) and wish to start your own business this scheme means you don’t have to pay income tax on profits for two years to a max of €40k. you must be unemployed for at least 12 months months prior to starting the business. Ends 31 December 2018. Some conditions and requirement but in summary the business must be new and not set up through and existing company.
- Help to buy scheme – first time buyer. New build or self-build. Refund of income tax and dirt paid over previous 4 years. Max €20,000 (so value of €400,000 @5%).
- Home Renovation incentive (HRI): you may be entitled to claim and income tax credit of 13.5% of the money you spend on painting and decoration, plastering, plumbing, tiling, extensions and garden landscaping. Landlords may also be able to claim an incentive under the incentive. Tax credit can be claimed on an expenditure over €4,405 up to a maximum of €30,000 spread over 2 tax years. Contractor must submit details of work carried out via revenue online Home Renovation Incentive system before you make the claim. Relief expected to run out end of 2018.
- Rent a Room Relief: If you rent a room in your house you can claim up to €14,000 each year free of tax. The €14,000 also applied to money you might receive for food, laundry or similar goods and services. The relief applies to the gross amount you receive before deducting any amounts for your own expenses. Beware of going over the €14,000. If you do, the entire amount is taxable.
- Life Assurance and inheritance tax: The life assurance of certain life assurance policies, known as section 60 policies can be exempt from inheritance tax. It is a way of helping your beneficiaries pay their inheritance tax without having to break up your estate to meet the tax bill. Just make sure that the inheritance tax policy is in a form that is approved by revenue.
- Tax Saver Commuter Scheme: your employer can buy a monthly or yearly travel pass for use on the bs, train, luas, dart and ferry for you, thereby saving up to 52% (tax, USC, and PRSI) on the regular cost of your travel ticket, depending on your tax bands.
- Cycle to work scheme: Tax relief is available under the scheme for the cost to the employer of providing a bicycle and safety equipment for the employee. The Maximum cost qualifying for relief is €1,000. So if your employer purchases a bicycle, helmet, lights for a total cost of €1,000 on your behalf, the net cost to you, (assuming 40% tax, 8% USC and 4% PRSI) will be €480
- Work Expenses: Revenue has arrangement in place to grant so called “flat rate” expense for employees working in a range of activities. Nurses, Optometrists, panel beaters, grooms, musicians, journalists and air crew, to name a few, may claim for a fixed amount of expense provided certain conditions are met. Easiest way to check if you are eligible for “List of flat rate schedule E Expenses” on the Revenue Website.
- Medical Expenses: Relief may be claimed as a tax credit for medical expenses paid for by you for yourself and others. For expenses paid for others, you don’t need to be related to the person, just as long as you paid it for someone else. Expenses qualifying for relief include Doctors visits, consultants fees, prescription medicine, physiotherapy, and routine maternity care. Some expense incurred abroad including certain travel cost, can also be claimed for relief. The tax credit is 20% of the amount of medical expenses incurred which have not been reimbursed. So you cant include amounts which have been reimbursed by private health insurers. This can be done via revenue online by going to my account section. You can claim back over 4 years. You don’t need to send revenue your receipts, just make sure you keep the for at least 6 years in case revenue request them at a later date.
- Dental Expenses: Tax relief is also available for the cost of some dental treatments. Only non-routine treatments qualify for the relief. For example, crowns, veneers and orthodontics. Routine check ups and fillings don’t qualify. Just like medical expenses tax relief is applied at 20% off the treatment amount excluding any amount already reimbursed. Therefor if you paid €1,00 to have a crown fitted, you will receive a tax relief of €200.
- Nursing Home Costs: In the case of nursing home cost you can claim a relief at your highest rate of income tax (40%) if you paid nursing home charges for 24 hour nurse care on site for yourself or on behalf of somebody else during the year. Any amount over and above the fair deal scheme are also allowed at your highest rate of tax. This is applied the same way you would claim medical expenses.
- College Fees: You may be able to claim relief @ 20% on tuition fees paid in respect of third level colleges, as long as the fees are fully paid and don’t exceed €7,000per annum per student. The relief applies to tuition online and does not cover administration, examination, accommodation or registration. Relief isn’t available if part of the tuition is paid for by a grant. IF fees are paid in instalments, relief can still be claimed once all paid. Each claim is subject to an annual disregard amount of €3,000. Revenue publishes a list of colleges and course eligible for relief on revenue.ie and also publishes examples of how to claim them.
- Incapacitated child credit: This credit is available if you are a parent or a guardian of a child who is physically or mentally incapacitated. The credit available for 2018 is €3,300. You may claim the credit for more than one child and where the child is maintain by more than one person, the credit is divided between then in proportion to the amount paid for by each toward the maintenance of the child. The credit is in addition to the relief you might be due for medical expenses you might incur for the child.
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