There is an enormous amount of information on tax credits, so in order to stop this article turning into a novel, I have concentrated on what I believe are the most relevant.
I have then listed all the other tax credits at the end of the mail. If you need further details on any of these, drop me a mail and I will happily send you more information.
If you pay medical expenses that are not covered by the State or by private health insurance, you may claim tax relief on some of those expenses. These expenses include the costs involved in nursing home care.
Tax relief is also available for premiums paid for health insurance and for long-term care insurance. The insurance company grants this tax relief at source. You can claim tax relief on medical expenses you pay for yourself and on behalf of any other person.
Tax relief on medical and health expenses is given at the standard rate of 20%. However, tax relief on nursing home expenses can be claimed at your highest rate of tax.
You can claim relief only if you cannot recover the expenses from any other source. You cannot claim tax relief for sums already received or due to be received from:
- A public or local authority, for example, the HSE (Health Service Authority)
- An insurance policy
- Any other source, for example, compensation
You can claim tax relief on:
- Costs of doctors and consultants fees
- Items or treatments prescribed by a doctor or consultant
- Maintenance or treatment in a hospital or a nursing home
- Costs of speech and language therapy carried out by a speech and language therapist for a qualifying child
- Transport by ambulance
- Costs of educational psychological assessments carried out by an educational psychologist for a qualifying child
- Certain items of expenditure in respect of a child suffering from a serious life threatening illness
- Kidney patients’ expenses (up to a maximum amount depending on whether the patient uses hospital dialysis, home dialysis or CAPD)
- Specialised dental treatment
- Routine maternity care
- In-vitro fertilisation
The following, where prescribed by a doctor, also qualify for medical expenses relief:
- Drugs and medicines
- Diagnostic procedures
- Orthoptic or similar treatment
- Hearing aids
- Orthopaedic bed or chair
- Wheelchair or wheelchair lift (no relief is due for alteration to the building to facilitate a lift)
- Glucometer machine for a diabetic
- Engaging a qualified nurse in the case of a serious illness
- Physiotherapy, chiropody/podiatry services or similar treatment
- Cost of a computer where there is medical evidence that it is necessary to help a person with a severe disability to communicate
- Cost of gluten-free food for coeliacs. As this condition is generally ongoing, a letter (instead of prescriptions) from a doctor stating that the individual is a coeliac sufferer is acceptable. Receipts from supermarkets in addition to receipts from chemists are acceptable.
You cannot claim relief for cosmetic surgery costs, unless you need the surgery as a result of a congenital abnormality, personal injury or disease.
Health Insurance Tax Credit
If you are a member of an approved private health insurance scheme, you may get a tax credit. This tax credit is generally granted directly by the insurance company. Your premium will be reduced by the amount of the tax credit so you will probably not even notice that you have got a tax credit. This is known as Tax Relief at Source (TRS). Subscribers to an approved private health insurance scheme pay a reduced premium (80% of the gross amount) to the insurance company. This is the same as giving tax relief at the standard rate of 20%.
Travelling abroad for treatment
You can claim tax relief on the cost of medical treatment obtained outside the State. You can claim for treatment abroad that is also available in the State but you cannot claim travelling expenses for this care.
Dental and optical treatment
You cannot get tax relief for routine ophthalmic and dental care. Routine ophthalmic treatment covers sight testing, provision and maintenance of glasses and contact lenses. You can get tax relief for orthoptic or similar treatment where prescribed by a doctor. Routine dental treatment covers extractions, scaling and filling of teeth and provision and repairing of artificial teeth and dentures.
The following dental treatments do qualify for tax relief:
- Veneers/Rembrant type etched fillings
- Tip replacing
- Gold posts
- Gold inlays
- Endodontics (root canal treatment)
- Periodontal treatment
- Orthodontic treatment
- Surgical extraction of impacted wisdom teeth: this qualifies for tax relief when it is undertaken in hospital.
Nursing home payments
Maintenance or treatment in a hospital includes maintenance or treatment in a nursing home. If you are paying the nursing home fees, you can get the tax relief – whether you are in the nursing home yourself or you are paying for another person to be there.
Older people – Tax Credits
If you are aged 65 or over, you are liable to pay income tax in the normal way. However, there are tax exemption limits for people aged 65 or over and there are some extra tax credits.
Tax exemption limits for people aged 65 and over:
Single or widowed or surviving civil partner €18,000
Married or in a civil partnership €36,000
Age Tax Credit
This is additional to the personal tax credit and may be claimed once you or your spouse or civil partner reaches the age of 65.
- Status 2014
- Single or widowed or surviving civil partner €245
- Married or in a civil partnership €490
Dependent Relative Tax Credit
This credit is granted to if you pay tax and maintain, at your own expense, any person who comes within any of the following categories:
A relative, including a relative of your spouse or civil partner, who is unable to maintain himself or herself as a result of old age or ill-health
A widowed parent / surviving civil partner parent of either yourself or your spouse or civil partner, irrespective of the state of his/her health
A son or daughter of either yourself or your spouse or civil partner who lives with you and on whose services you must depend as a result of old age or ill health
The relative’s own income must be below a certain amount to claim this tax credit. This tax credit is €70 for 2014.
Allowance for employing a carer
If you employ a person to take care of an incapacitated member of your family, you may get an additional allowance. The maximum allowance is €50,000. Relief for employing a carer is allowable at your highest rate of tax.
Deposit Interest Retention Tax
Deposit Interest Retention Tax (DIRT) is deducted from the interest payable on savings in banks, building societies, etc. This happens whether or not you would normally be liable for tax. If you are aged 65 or over or your spouse or civil partner is aged 65 or over or if you are permanently incapacitated, you may not be liable for DIRT if you are exempt from income tax.
Employment tax credits and relief
PAYE Tax Credit
income tax credit
If you are in employment, tax on your income is deducted by your employer on behalf of the Revenue Commissioners. This system of deduction is known as the Pay As You Earn (PAYE) system. All PAYE taxpayers are entitled to a tax credit known as the PAYE Tax Credit. This is worth €1,650 in 2015. If you are married and taxed under joint assessment, then you and your spouse may both claim the PAYE Tax Credit.
Trade Union Tax Credit
If you were a member of a trade union during the tax year and paid a membership subscription, then you could claim a tax allowance in 2010 of up to €350, equal to a maximum credit of €70 (this allowance was abolished from 2011).
If you have been a member of more than one trade union during the year you can only claim one credit.
Some work expenses can be deducted from your income before it is assessed for tax. To qualify, the expenses must have been necessary in order to do your work and must have been spent entirely for that purpose and no other.
A mileage allowance that you receive for the use of your car for business purposes is not taxable if it does not exceed the civil service mileage rates.
There is no tax relief on expenses for getting to or from work.
Contributions to a pension are eligible for tax relief.
If you are resident in Ireland and commute daily or weekly to your place of work in another country where you pay tax, then you may qualify for Trans-border Workers Relief. This reduces your tax in Ireland to take account of the tax that you have paid abroad. It does this by reducing the tax you pay in Ireland on your total income so that it is in proportion to the amount of income from Irish sources.
For example, take the case where your total income was €50,000, of which €5,000 was earned in Ireland and the remainder (€45,000) was earned and taxed abroad.
The proportion of your total income that is Irish income is 1/10 (5,000 divided by 50,000).
Your Irish income tax liability is calculated as usual on the full amount of your income, €50,000 .
But under Trans-border Workers Relief, this amount of tax is then divided by ten to give the tax that you have to pay in Ireland.
There are certain conditions on the duration and place of employment. More information on Trans-border Workers Relief is available.
If you are employed on board a ship and spend at least 161 days in a calendar year at sea travelling to or from foreign ports, then you may qualify for Seafarer’s Allowance. The allowance is €6,350 and it is an allowance available at your highest rate of tax.
Housing tax credits
You can claim tax relief on certain housing expenses.
Home Renovation Incentive
The Home Renovation Incentive (HRI) provides an income tax credit to homeowners and landlords who carry out qualifying renovation and improvement works. It was introduced for homeowners in October 2013 and was extended to landlords in October 2014. It is payable over the 2 years following the year in which the work is carried out. The credit is calculated at a rate of 13.5% on all qualifying expenditure over €4,405 (before VAT) up to a maximum of €30,000 (before VAT). Qualifying works include extensions and renovations to the home, window-fitting, plumbing, tiling and plastering. Builders must be fully tax-compliant and all expenditure and relief claims must be registered electronically with the Revenue Commissioners.
Tax relief on mortgage interest
Mortgage interest relief is a tax relief based on the amount of qualifying mortgage interest that you pay in a given tax year for your principal private residence (your home). A tax year means the period from 1 January to 31 December. Mortgages taken out after 31 December 2012 no longer qualify for mortgage interest relief. Mortgage interest relief will be abolished entirely after 31 December 2017.
Tax relief for third-level fees
You may be able to claim tax relief on tuition fees paid for approved:
- Undergraduate courses
- Postgraduate courses
- Information technology (IT) and foreign language courses.
Lists of courses and colleges approved for relief each year are published on the Revenue website.
You can claim tax relief as long as you have actually paid the fees, either on your own behalf or on behalf of another person.
You cannot claim tax relief on:
- Examination or administration fees
- Any part of the tuition fees that is met directly or indirectly by a grant, a scholarship or otherwise, e.g. where fees are reimbursed by an employer.
- Payments that qualify for tax relief
The maximum amount of fees (including the Student Contribution) that can qualify for tax relief is €7,000 per person per course.
Full-time student: There is no tax relief on the first €2,750 spent on tuition fees (including the Student Contribution) for the 2014/2015 academic year.
Part-time student: There is no tax relief on the first €1,375 spent on tuition fees (including the Student Contribution) for the 2014/2015 academic year.
More than one student: If you are claiming for more than one student, you will get full tax relief on tuition fees (including the Student Contribution) for the second or subsequent students.
Rates of tax relief
Tax relief is given at the standard rate of 20%.
There is no limit on the number of individuals for whom you can claim.
Start Your Own Business Relief
If you have been unemployed for at least 12 months and set up a qualifying business, the Start Your Own Business scheme provides an exemption from income tax up to a maximum of €40,000 per annum for a period of 2 years.
Start Your Own Business Relief only applies to income tax payable on the profits from your business. It does not extend to PRSI and Universal Social Charge (USC) so you will be liable to pay PRSI and USC on any profits earned in your new business. The Start Your Own Business scheme runs from 25 October 2013 to 31 December 2016.
You may qualify for this relief if you have been unemployed and getting any (or a combination) of the following for 12 months or more:
- Jobseeker’s Allowance
- Jobseeker’s Benefit
- One-Parent Family Payment
- Partial Capacity Payment
- Credited contributions
If you qualify for the Start Your Own Business Relief, the following must also apply:
- The business must be set up between 25 October 2013 and 31 December 2016
- It must be a new business (not a business that is bought, inherited or otherwise acquired)
- It must be unincorporated, that is, it must not be registered as a company
You can claim the relief on up to €40,000 of profits each year for 2 years. How you calculate the relief depends on when you started your new business.
Year 1: You do not have to pay income tax on your profits if they are less than the cap. If you start your new business in January (and you use the calendar year as your accounting year) the cap for the year is €40,000. If you start your business later in the year then the cap will be reduced proportionately according to the month you start. For example if you start your business in February, 11 months remain in the year so you can earn up €36,667 (11/12 of €40,000). If you start your business in December, one month remains in the year so you can earn up to €3,333 (1/12 of €40,000).
Year 2: You do not have to pay income tax on your profits if they are less than the cap of €40,000. The accounts for the second year will always be for a period of 12 months.
Year 3: Profits for any part of this year which fall within the first 24 months of business are income tax free once they are less than the cap. The cap for year 3 is calculated as €40,000 x [months left to claim] / 12. If you started your business in January, then you have used up the 24 months relief in Year 1 and Year 2 and there is no relief available for Year 3. If you started your business later in the year then there is still some relief available.
If you make a loss in your first year of trading you can claim Start Your Own Business Relief before you claim relief for losses in following years. This ensures that if you make a loss you receive actual value for those losses in future years rather than having to set those losses against profits which would not have been subject to income tax under the Start Your Own Business scheme.
Other Available Credits
- Age Credit
- Blind Credit
- Dependent Relative Credit
- Guide Dog Allowance
- Home Carer Credit
- Incapacitated Child
- One Parent Family Credit
- PAYE Credit
- Personal Tax Credits
- Person employed to take care of an incapacitated individual
- Rent Credit
- Revenue Job Assist
- Seafarer’s Credit
- Single Person Child Carer Credit
- Taxation of Married Couples and Civil Partners
- Widowed Person or Surviving Civil Partner with a dependent child
For further information related to tax credits and how they may apply to you please do get in touch with Kilcoyne Accountants and we will be happy to answer all of your queries.