Ten ways to save YOU tax
1. Tax relief at source.
Check you are availing of all tax credits when paying expenses such as the mortgage on your main residence and private health cover like VHI.
You may have opted out of getting this relief at source and are therefore due a significant refund.
2. Get a pension and make the most of it.
If you are not in pensionable employment you can set up and invest in your own private pension plan.
Depending on your age and profession, you can invest up to 40% of your net relevant earnings into a personal pension and avoid tax at the top rate
3. Medical and dental expenses.
Medical bills and non routing dental expenses can be claimed as expenses to reduce your tax bill.
For simplicity, make sure your doctor / dentist and local pharmacy can give you an annual statement of how much medical expenses you have had had through the year. Then simply fill in the MED1 tax form and claim your refund.
4. Use the on line return facility provided by Revenue.
This system at www.ros.ie (revenue online) is simple to use and allows you to do a quick check to see if you have over paid tax.
5. Invest in a business expansion scheme (BES).
Last year Brendan Cowan as minister for finance increased the limit one individual can invest in a BES in a year to €150,000. This investment can be set off against your income in that year. After 5 years any repayment of your BES investment is free of income tax.
You will however be liable for capital gains tax of 20% on any gains made less expenses.
Remember though gains are not guaranteed so seek advice when choosing the right BES for you.
6. Rent relief
If you live in private rented accommodation you are entitled to relief at the standard rate (20%).
For single people under 55 the allowance is €1,800 and is doubled in the case of a married couple.
For the over 55’s the allowances are double that of single people.
With the credit crunch on, and the cost of living rising by the day, people with new houses and therefore new mortgages can ease the burden by renting a room out to students.
€10,000 of this income is allowable tax free!
7. Losses on disposal of shares
If you invested in shares like eircom and made a loss, you can carry this loss forward indefinitely and used against future gains.
8. Donations to charities
Unlike the self employed, PAYE do not get back relief for donations to charities.
However, if you want to boost your donation to the recipient (e.g. the church from your Sunday donations) simply get the appropriate certificate from your priest and return it to revenue. This will increase your donation by 20%.
9. Covenants.
In this situation an individual can claim tax relief of payments made as covenants.
Recipients of covenants can be :
· Persons permanently incapacitated.
· Permanently incapacitated minor child if paid by persons other than the parent.
· Persons aged 65 or over.
· Bodies established for the promotion of human rights.
Note all above restricted to 5% of the covenantor’s total income except for permanently incapacitated persons where unrestricted relief is available.
10. Keep it in the family
And finally look at the previous article in this series – ‘Keep it in the family’ to see ten other tax saving opportunities for you.