In our latest Online Financial Learning Seminar titled “How to Maximise your Tax-Free Income” we look at many aspects of tax from claiming tax free credits and reliefs to maximising your tax-free income upon retirement or using the Revenue online portal My Account to allow us manage our taxes in an efficient manner. Benjamin Franklin’s famous quote “in this world nothing can be said to be certain, except death and taxes” is very true whether it is income tax or VAT on our shopping it is almost impossible to avoid paying tax. But how many of us are claiming all the reliefs and credits available to us, remember reliefs and credits mean paying less tax.
What are Tax Credit and Reliefs can I claim?
Tax Credits and Reliefs reduce the amount of tax you pay. There is an extensive list with conditions and rules, here are some of common Credits and Reliefs you can claim:
• Employee Credit – €1,650
• Personal Tax Credit – €1,650 Single, €3,300 Married, €2,190 Widowed.
• One Parent Family – €1,650
• Home Carer Credit – €1,600
• Earned Income Credit – €1,500 (available to the self-employed)
• First time buyers – €5,000 to €15,000, deducted at source on mortgages up to December 31st, 2012 and deducted at source by the mortgage provider.
• Private Health Insurance (relief at the lower 20% tax rate) and deducted at source by the health insurance provider.
There are many Credits and Reliefs not claimed, again subject to conditions and rules, and they include:
• Medical Expenses (relief at the lower 20% tax rate)
• Pension Contributions (relief at the higher 40% tax rate)
• Salary Protection Premium, also known as Income Protection or Income Continuance (relief at the higher 40% tax rate)
• Flat Rate Expenses (up to €1,312 per annum depending on your occupation to cover associated occupation costs)
• Life Insurance Premiums on Pension Term Assurance, (relief at the higher 40% tax rate)
• Capital Gains Tax annual exemption on profit from the sale of an asset (€1,270)
• Capital Acquisition Tax exemption on inheritance or gifts (can be offset with section 72 or section 73 policy)
• Joint Assessment (Married couple or civil partners)
• Rent a Room – (€14,000 tax free per annum)
• Working from home – E-Working (up to €99.20 per month)
• Deposit Interest Retention Tax (DIRT) exemption on deposits (over the age of 65 or permanently incapacitated)
• Nursing Home Expenses (relief at the higher 40% tax rate to who pays) • Tuition Fees (relief at the lower 20% tax rate, up to €7,000 per annum) Again, these Credits and Reliefs are subject to conditions and rules.
Why is Joint Assessment beneficial for married couples?
Joint Assessment means you can allocate most of your tax credits, reliefs and standard rate cut off point (SCORP the amount of income you pay the lower tax rate) with your spouse or civil partner. This is beneficial where one spouse is on the higher tax rate (40%) and the other is on the lower rate (20%) or where one spouse is not working. As a result, you can reduce the amount of tax you have to pay at the higher rate, which could be a significant saving. The standard rate cut-off point for married couples is €42,800 per annum.
How do I maximise my Tax-Free income at retirement age?
Pension contributions qualify for 40% tax relief as does salary protection and pension term assurance. The amount of relief at your marginal tax rate depends on your age but ranges from 15% to 40% of your earning but capped at €115,000 in earnings. People aged 65 and over are subject to the same general tax rules as everyone else but they do get tax exemption limits below which they pay no tax and some extra tax credits. The annual exemption limit for a single or widowed person is €18,000 and if you are married it is €36,000. Regarding tax free lump sums from your pension, while the first €200,000 is tax free over your lifetime, the next €300,000 is taxed at the lower tax rate of 20%. It is important that withdrawals are manged in a tax efficient manner.
CUinsured Ltd Trusted by Credit Unions in Ireland. CUinsured Ltd is regulated by the Central Bank of Ireland. This article is for discussions purposes only and should be read in conjunction with the relevant product terms and conditions, and Revenue Rules.