Now for our discussion on tax. Alot of people shy away from the discussion when tax comes up but it really isn't that difficult for most people.
Noone likes to pay taxes but they are a fact of life and all you can do is ensure that you are not paying too much tax. The main area where you could be paying too much tax is with income tax.
Basically, you pay tax at 20% on the first €34,000 you earn and at 41% on anything after that. However, you will get a number of tax credits that you can use to offet your income tax owed. To claim any of these reliefs, you do not need to make an annual return. You simply need to contact the Revenue or register on line with www.reachservices.ie. Therefore, I advise you to look at each credit individually and determine whether you are entitled to it. Alot of people, for example, don't know about the tax relief available on bin charges. This alone is worth €80 for 2006 and can be claimed both for 2006 and for a number of years in the past where you have not claimed it. Below are details of each tax credit:
Basic Tax Credits (You will qualify for one of the three below)
Single Person: For 2007, this is €1,760. This is standard tax credit and, unless you are married in which case you will get the Married Person tax credit, you will always receive this.
Married Person: For 2007, this is €3,520. This is the total relief available to a married couple and replaces the Single Person tax credit. Of course, this is only if you are being jointly assessed for tax (which is usually the best way - see http://www.revenue.ie/index.htm?/leaflets/it9.htm for more details).
Widowed Person (without dependent children): For 2007, this is €2,130. You can claim this instead of the Single/Married Person tax credit if you are widowed and have no dependant children.
Additional Tax Credits
PAYE Tax Credit: For 2007, this is €1,760. You can claim it if you are a PAYE employee other than a proprietary director.
Widowed Parent: You can claim this in addition to the Single Person tax credit at the rate of €3,750 in the first year following the bereavement of your partner reducing by €500 for each subsequent year for five years.
One-Parent Family Tax Credit: For 2007, this is €1,760. It is payable if you have a qualifying dependent. See http://www.revenue.ie/index.htm?/leaflets/it9.htm for details. What's interesting to note here is that, as far as I'm aware, if the two parents of a child have split up and that child spends at least one night in each of the two parents houses each year, both parents are entitled to the relief. The exception to this is where you are a person qualifying for the Married Person's tax credit or you are a person living together with another person as man and wife.
Home Carer’s Tax Credit: This can be claimed if one spouse stays at home (or if the person being cared for lives within a 2km radius and there is a a direct communication link (e.g. telephone, alarm system) between the two residences) minding a dependant child, person over 65 or incapacitated person. See http://www.revenue.ie/leaflets/it66.pdf for more details.
Incapacitated Child Tax Credit: This is €3,000 for 2007. This tax credit can be claimed by the parents if a child has a permanent physical or mental disability.
Blind Tax Credit: For a single person or a couple where one spouse is blind, the relief due is €1,760. For a couple where both spouses are blind, the relief is €3,520. Relief of €825 at your highest tax rate is given annually if you or your spouse have a guide dog and you are a registered owner with the Irish Guide Dog Association.
Age Tax Credit: For 2007, this is €275 (Single/widowed) / €550 (Married). You can claim it if you are aged 65 or over. For married couples, only one person needs to be over 65. An additional €80 can be claimed if you have a dependant relative.
Employing a carer: This tax allowance of up to €50,000 at your highest tax rate is available where a person is employed to care for a person with a disability including a child. One or more family members of the person being cared for can claim the allowance. See http://www.revenue.ie/leaflets/it47.pdf for more details.
Rent Relief: You can claim this if you pay rent to a private landlord. Relief is due at the standard rate of tax (20%) subject to the following limits: Single: €1,800 / Married/Widowed: €3,600. Both reliefs are doubled if you are over 55.
Trade Union Subscriptions: A tax credit at the standard rate of income tax (20%) is available on trade union subscriptions up to a maximum of €300. Therefore this relief is worth up to €60. For example, if your membership subscription is €100, you will get a tax credit of €20.
Bin charges, Water Charges, Sewage Charges: A maximum of €400 tax relief is granted (at 20% tax rate) in 2007 for bin charges paid in the year 2006. This is available if you pay the charges to a local authority OR if you buy bin labels.
Deposit Interest Retention Tax (DIRT): Individuals exempt from income tax over 65 years of age or permanently incapacitated will be entitled to receive deposit interest without deduction of DIRT on giving appropriate notification to the financial institution.
Childminding Relief: Budget 2006 introduced an exemption of up to €10,000 per annum on income from childminding where an individual minds up to three children, who are not their own, in the minder's own home. If childminding income exceeds this, the total amount is taxable, as normal, under self-assessment. This limit is being increased to €15,000.
Mortgage Interest Relief: Tax Relief at Source (TRS): Your lender should be reducing your interest payments at the standard rate of 20% subject to the upper ceiling allowable. The current annual ceiling on the amount of interest that can be allowed on a mortgage is €8,000/€16,000 single/married for first-time buyers. The increased relief will be available to all first-time buyers who are in the first seven years of their mortgage. The ceiling for non-first-time buyers is €3,000/€6,000 single/married.
College Fees: If your children or you are going to college, relief is available at the standard rate of 20% on fees up to €5,000.
Private Health Insurance (VHI, BUPA, Vivas etc.): If your employer pays for private health insurance on your behalf it will be taxed as a benefit in kind and you are entitled to claim a tax credit equal to 20% of the gross amount. If you pay for private health insurance directly, the premium is reduced by the tax credit at source, so you have no further claim.
Health/Medical Expenses Relief: Includes medical expenses/prescribed drugs for you, your spouse, your children or dependent relatives but excludes routine dental and ophthalmic care. This relief is available at your highest rate of tax.
