With the cost of living escalating year on year, taxpayers need to do everything they can to make every Euro count. While it is against the law to cheat on your taxes, you are entitled to certain tax deductions each year. Read on to find out how you can legally reduce the amount of tax that you pay over to the Receiver of Revenue.
Saving Money On Capital Acquisitions Tax (CAT)
Capital Acquisitions Tax (CAT) of up to 33% is payable by anyone who receives a financial gift within the tax year. Thankfully, there is a €3,000 exemption for people who receive gifts. The €3,000 is deducted from the value of the gift and the recipient is taxed on the remaining amount. The exemption does not apply to inheritances, only gifts.
Parents can help their adult children to save on tax by gifting their children a maximum of €3,000 per year, thereby falling within the tax exemption amount. This can be done every year to ensure that children avoid having to pay tax on these gifts.
1. Receive Tax Relief When You Cycle To Work
Get fit, save on travelling expenses and obtain tax relief when you use a bicycle to commute to work. The tax relief covers the cost of the bicycle and related equipment. You are permitted to trade a portion of your salary during the year in lieu of your employer purchasing a bicycle for you to commute to and from work. Should a bike and related equipment cost €1,000, you will only be out of pocket for €490.
2. Dental Treatments
Taxpayers can receive tax relief on certain types of dental procedures. Orthodontics, veneers and crowns (which are all specialised types of treatment) qualify for tax relief. Make sure to obtain an MED 2 form highlighting all the specialised dental treatments that you have received.
As is the case with tax relief on medical costs, you can receive up to 20% tax relief on these specialized dental procedures. If you paid €2, 000 for a dental procedure you would claim €400 from the tax man. Standard procedures including fillings and repairs to teeth do not qualify for tax rebates.
3. Life Assurance And Tax Relief
Proceeds from life insurance used to pay for inheritance tax are exempt from taxation. The exemption only applies if the inheritance tax is paid within 12 months of life assured’s death. Any money not utilized to pay inheritance tax will be subject to normal rate of taxation.
4. CAT House Exemption
Tax relief on houses is subject to certain incredibly strict criteria. Sadly, this means that most people who inherit a house when their parents die, are not eligible for tax relief. In order to qualify for tax relief, you must have resided on the property for at least 3 years before you received it as a gift, and for another 6 years after you receive it. If you own more than one property – albeit for investment purposes -, you won’t qualify for tax relief either.
5. Employment And Investment Incentive (EII)
The Employment and Investment Incentive allows for tax relief on investments made in specific corporate trades. Qualifiers can receive tax relief on amounts invested, not exceeding €150,000 per annum.
Taxpayers initially receive 30% tax relief with a further 10% possible if it can be proved that the levels of employment have increased during a certain time frame. Tax benefits are available if the company has used the investment money for research and development.
Tax laws and procedures are complex and it is well worth the time and money spent to consult with a tax consultant so that you obtain the maximum relief possible without falling foul of the law.