By Ann McCabe
WHEN an individual works as an employee, their tax (PAYE, USC and PRSI) is automatically deducted by the employer.
When an individual is self-employed, they either return a Form 11 themselves or their accountant does it and the normal credits will automatically be added.
But it is important to know that you may be entitled to additional tax credits or reliefs to reduce the amount of tax you pay in the year depending on your current situation.
Other than the normal tax credits available to everyone, there are additional tax credits available in certain situations. Some of the main ones include:
Home carer tax credit – If one spouse or civil partner works in the home, caring for one or more dependant people – a dependant person is defined as a child whom child benefit is payable, a person aged 65 or over or a person with a disability who requires care. There are different rates of credit available depending on whether the home carer has an income or not.
Single person child carer credit – If you are a one parent family, caring for a child on your own, you can claim this credit and your tax rate band increases, therefore allowing you to earn more money before paying the higher rate of tax.
Widowed person or surviving civil partner – Depending on the tax treatment of the deceased person, there are additional tax credits available to widowed persons and surviving civil partners following a death.
Age tax credit – If you are aged 65 or over there are some additional tax credits available and also tax exemption limits, which allow you to earn more money before paying tax.
Incapacitated child credit – This is available to the parent or guardian of a child who is permanently incapacitated, either physically or mentally and where there is a reasonable expectation that the child will not be able to support oneself when they are over 18.
Rent Tax credit – The maximum credit available to single people is €500 and to jointly assessed people is €1,000. The amount of the credit received will depend on the amount of rent you pay and on the amount of Income Tax you pay.
There are also tax reliefs available to reduce the amount of tax paid:
Medical expenses – You can claim tax relief on medical expenses that you have paid personally and have not been reimbursed by private health insurance. You can also claim tax relief on nursing home fees paid by yourself.
Third level education fees – You may be able to claim relief on tuition fees paid for third level education. There are a list of approved courses and colleges available online. There are different thresholds depending on whether you or your child is a full-time or part-time student. This relief is primarily when you have two children in third-level education.
Rent a room relief – If you rent a room in your own home to private tenants, you are allowed to earn up to €14,000 per year tax free. If you earn above the €14,000 then the full amount of income will be liable for Income Tax. There are certain conditions to this relief.
Pension contribution relief – When you pay into a pension you get Income tax relief at your highest tax rate up to certain limits. Paying into a pension is not only an excellent way to plan financially for your future, but it is also a great way to save money on your tax bill each year.
The list above is not exhaustive, it is giving an outline of the main credits and reliefs available to taxpayers. All information regarding the credits and reliefs available is on the Revenue website and on Citizens Advice website.
You can view your tax credit certificate online using the Revenue myAccount website. If you qualify for any of the additional tax credits available, you can indicate this through the website.
You can also claim the tax reliefs available to you using this website.
If you are entitled to a refund Revenue will pay it into your bank account or issue a cheque.
If your accountant is making your return you should discuss with them the possibility of availing of these credits and reliefs.
It is important to know all the credits and reliefs available to you to reduce the amount of tax you pay, but it is also important to not claim credits and reliefs you are not entitled to as you could face a large tax bill in the future, and you may also have to pay interest and penalties on any liability owing.
• Ann McCabe is an accountant with FDC in Bandon.
