Commonly missed tax savings

If your employer pays your medical insurance

Individuals get tax relief at source when they pay medical insurance e.g. VHI, Quinn. Companies do not get this relief. Also if you get thios perk you are taxed on the full grossed up value of the premium. You need to claim back the tax credit or it is lost.

Example (ignoring PRSI and levies)

   
Insurance paid nett 2,000
Gross up 2,500
Income Tax  41%  1,025
   
Claim back Tax Credit 20%    500

 Fees to Third Level Institutions

Fees paid for certain HETAC approved courses attract a tax credit at the 20% standard rate. The maximum fees allowed are €5,000 in any year. Therefore the maximum tax saving is €1,000.

Caring for elderly or incapacitated relatives

Carers Payments

Payments to a carer for an elderly or incapacitated relative

These payments are allowed at your higher rate.  They include nursing home fees. The maximum payment in any one year is €50,000. The tax saving, ignoring PRSI and levies is €20,500

Regular payments to elderly relatives

You may also be making regular payments to an elderly relativewhich are not covered by the carers allowance. However, by covenanting the money you can utilise their tax credits to save tax on theise payments. Many elderly people do not fullu use their credits and allowances. If their income is below the age exemption threshold they may not pay tax at all.

If the payment is legally binding to be for a minimum of six years you can deduct it from yourtaxable income

Example

You covenant €5,000 per annum to your elderly mother. Her annual income is €18,000 which is below the age threshold.

If you pay tax at the high rate the effect is

You deduct tax at 20% from the payment i.e. €1,000

You pay this tax over to Revenue

The full €5,000 is allowable as a deduction to you. You save tax, PRSI and levies at say 47% = €2,350

Your mother is can offset her alloances and credits to reclaim the €1,000.

The €5,000 has only cost you €2,650.

Leave a Reply

Spam protection by WP Captcha-Free