Income Tax Savings

1. Keep Your Receipts
   

This means keeping receipts of all your medical expenses, doctor’s visits, and work-related expenses if you’re self-employed.

Revenue carries out spot checks for up to six years, so you’ll need to keep your receipts for at least this amount of time.

2. Avail of all the tax credits available to you

Tax credits might sound complicated but in reality, they’re not. A tax credit works by reducing the amount of tax that you pay by the size of the tax credit.

most people are unaware of the home carer tax credit. can be claimed by any married couple or civil partnership where at least one of the spouses is a stay-at-home carer for either a dependent or their own children.

There is also the age tax credit. This is in addition to the personal tax credit that all workers are entitled to and may be claimed once you or your spouse or civil partner reaches the age of 65. If you’re single or widowed it’s €245 and if you’re married it’s €490.

And if you are recently widowed and have kids, you can claim a credit of €3,600 in the first year, tapering to €1,800 in year five.

3. Claim for work expenses 

Certain professions can also claim for expenses (namely tools, uniforms, and stationery) that are incurred as part of carrying out their day-to-day work.

For example, a nurse who supplies and launders their own uniform can claim a tax allowance of €733. And a skilled worker in the engineering or electrical industry who bears the full cost of their own tools and overalls can claim an allowance of €331.

4. Claim for your medical expenses

One of the most commonly unclaimed tax reliefs is for medical expenses, where 20% can be claimed back – providing the money hasn’t already been reimbursed through another source such as your health insurance for example.

Non-routine dental expenses like braces are also covered although things like fillings, scaling/cleaning, and tooth extraction are all considered to be routine dental treatments, so won’t be reimbursed, unfortunately. However, lots of other day-to-day medical expenses such as GP visits, consultant fees, prescribed physiotherapy and counseling sessions, acupuncture, routine maternity care, hearing aids, and IVF are all covered.

5. Get a refund on tuition fees 

Tax relief at 20% is also available on eligible third-level tuition fees. Here the relief is available to the person who has paid the fees, not the person who’s studying. So this means you could claim tax back on your children’s tuition fees as well as your own if you go back to college.

The relief is available on both part-time and full-time courses.

However, the relief only applies to amounts up to €7,000 per third-level course per year. Also, no relief is available for examination, registration, or administration fees, or for things like student levies or sports centre charges.

The €7,000 limit is per course, per person, per academic year. So if you have paid fees for yourself and one of your children, are studying more than one course, or have two children in third level at the same time, you can claim up to €7,000 for each course.

Unfortunately, the first €3,000 of fees for a full-time course and €1,500 for a part-time course do not qualify for relief each tax year. However, this only applies to the FIRST claim you make; if you make a second claim in the same year then you can claim on the full qualifying amount up to €7,000.

6. Get married 

Most PAYE workers are entitled to a €1,650 personal tax credit as well as a €1,650 PAYE/employee tax credit. Remember a tax credit simply reduces the amount of tax that you pay by that amount. So this means a PAYE worker can earn €16,500 a year before they start paying 20% income tax (as up until this point the €3,300 combined tax credit would more than offset the tax due).

However, if you’re earning a lot more than your spouse and/or your spouse isn’t using up all of their tax credits, you can transfer some of your spouse’s credits over to you to reduce your overall tax liability as a couple.

 

7. Start a pension

Pensions are a fantastic idea. They are a great way of gaining financial security and protecting your future. But they don’t just make sense for that reason alone; pensions are extremely tax-efficient as any money that you save into a pension is exempt from income tax up to a certain limit.

What this means is that if you were to save €100 a month into a pension, you won’t pay any income tax on that €100. So if you’re a higher-rate taxpayer a €100 monthly contribution will cost you just €60 in net terms (the other €40 which you’re putting into your pension would otherwise have been taken from your payslip in income tax).

8. Avail of the rent-a-room scheme

 

Under the rent-a-room scheme, you’re allowed to earn up to €14,000 a year entirely tax-free by renting out a spare room in your home. This differs hugely from Airbnb where all the money you receive will be subject to income tax at your marginal rate (so 40% if you earn over €35,300 a year) with the online platform now sharing booking details with Revenue to ensure the appropriate tax is paid!

9. Get a bike

The Cycle-to-Work Scheme was launched in 2014 and aims to encourage employees to cycle to and from work. Under the scheme, your employer can pay for bicycles and bicycle equipment for you which you pay back through your salary over a period of up to 12 months. You then don’t have to pay any income tax, PRSI or the Universal Social Charge on your repayments.

There is a limit of €1,250 per bicycle purchased (increased from €1,000 in August 2020) and €1,500 for electric bikes and the purchase can be made in any cycle shop.

So if you’re a higher-rate taxpayer and you purchase a new bike for €1,000, it’ll only cost you just over €500, spread out over 12 monthly payments.

10. Get on board with a Taxsaver ticket

Similar to the Cycle-to-Work Scheme, the Taxsaver scheme incentives people to use public transport to and from work. Again, under the scheme, your employer pays for your public transport ticket which you pay back through your salary each month. You then don’t have to pay any income tax, PRSI, or the Universal Social Charge on your repayments meaning you can make big savings and pay less tax.

Need assistance with your tax affairs contact Vanessa at 0860791476