It’s probably safe to say that most Irish people are entitled to tax credits, and many haven’t a clue what they are or which tax credits they're eligible to recieve... so we’re going to go ahead and clear up any confusion.
In this blog, we'll break down tax credits and answer some common questions on the subject.
How do tax credits work?
The amount of tax you pay is calculated as a percentage of your income and based on the tax credits you’re eligible for. Basically, a tax credit reduces your tax bill by the amount of the credit.
Did someone mention smaller tax bills?
Here's an example of how it works: If you’re eligible for the Single Person Tax Credit (worth €1,650), the tax you owe is reduced by €1,650.
See? It really is that simple.
Now you’re probably wondering 'how do I know what tax credits apply to me?'
Well, this can be a tricky one to figure out as it really depends on your personal circumstances - but don't worry, we've included a handy chart in this post to help you.
Oh, and the value of the applicable tax allowance depends on whether you pay tax at the higher (40%) or standard (20%) rate.
Here’s another example to make things a little clearer:
John is due €100 in applicable tax credits. He pays tax at the rate of 40%. He can claim it at this rate, reducing his tax bill by €40.
Sarah is also entitled to €100, however she pays tax at a rate of 20%. The relief if restricted to the standard rate, her claim will reduce the amount of tax she owes by €20.
Confused about your tax credits?
Personal Tax Credits
Every taxpayer who is resident in Ireland is entitled to personal tax credits.
The tax credit that applies to you will depend on your marital status;
- In a civil partnership
- Former civil partner
If you’re in employment, receiving a pension or you’re on a taxable social welfare payment like Jobseeker’s Benefit, you’re entitled to the Employee Tax Credit – formerly the PAYE tax credit.
Personal tax credits and PAYE tax credits are applied each year at source (this means the source of your income) but and this is a big ‘but’ it’s your responsibility to inform Revenue of your current marital status. Whether you’re a single pringle or happily married will affect the amount of tax you pay.
Failing to inform Revenue of your marital status could very well mean you end up being overcharged tax. In some cases you may be undercharged tax meaning you are left unaware of a looming tax laibility!
Oh no! Who wants to pay more tax than necessary?
So unless you don’t mind letting the government keep your hard earned dosh, you may want to learn more about what tax credits are available and which ones are applicable to you. Does that sound good?
How do I claim tax credits?
It’s a common misconception that Revenue will automatically apply tax credits. If you’re owed tax back for medical procedures, tuition fees etc. you’ll have to sort it out yourself. Also, the basic personal tax credit and PAYE tax credits should be automatically applied but in most cases aren't.
Confused about your tax credits?
What are some of the most common tax credits?
Single Person Tax Credit
Since 2014 the One Parent Family Tax Credit was abolished and replaced with the Single Person Tax Credit (SPCCC) has been €1,650.
Essentially, it’s a tax credit for those who are caring for a child on their own. This tax credit applies to an individual who is unmarried, separated, divorced or who is a former civil partner. If you fall into this category you are eligible to claim the SPCCC.
The SPCCC is in addition to the personal tax credit. If you’re widowed, deserted, separated, or unmarried and you have a child, stepchild or adopted child who lives with you for all or for part of the tax year – you are eligible to claim this tax credit.
You can’t claim this tax credit for the year that you became widowed or a surviving civil partner (the year of bereavement) because during this time you should be in receipt of the basic personal tax credit of €3,300.
Married person or civil partner tax credit
If you’re married or in a civil partnership, this tax credit will apply to you. You and your partner must decide who will be the assessable spouse or nominated civil partner. The nominated individual is entitled to claim this tax credit.
If you’re wondering how much it’s worth, it will save you €3,300.
You must be jointly assessed to claim this tax credit. If you'd like to find out more about this, check out our blog on marraige and tax savings.
Widowed person or surviving civil partner tax credit
The amount you will receive for this tax credit depends on whether the widowed individual or surviving partner has dependent children. The time in which your spouse passed away is also taken into consideration.
The standard amount for this tax credit is €2,190. However, in the year of bereavement, it is a rate of €3,300.
In the case that a widowed individual or surviving partner has dependent children, they will also be eligible for the Single Person Child Carer credit in addition to the Widowed Person or Surviving Civil Partner Tax Credit.
Home Carer’s Tax Credit
The Home Carers Tax Credit is tax relief available to couples who are married or in a civil partnership as long as they’re jointly assessed for tax purposes. One spouse must stay at home caring for a dependent person. In this case, that person may qualify for the relief. It will then reduce the amount of tax that they pay to Revenue as a couple.
Tax relief is available if you pay tuition fees for undergraduate, postgraduate, information technology (IT) and foreign language courses. You’ll have to check and see if the educational institution for which you’re paying the fees is eligible.
You can’t claim tax back on fees that have been covered by any kind of scholarship or bursary.
The first €3,000 of a full-time student’s fees do not qualify for the relief.
The first €1,500 of a part-time student’s fees don’t qualify either.
The maximum limit on qualifying fees is €7,000.
Examination and administration fees don’t qualify.
Here's a chart with some of the most common tax credits and rates for 2018/19:
Help! I’m still confused about my tax credits!
Every day Taxback.com help people all over the world claim tax refunds from 12 countries worldwide. It's our mission to make sure that nobody overpays tax - so if you want to get the most from your tax refund, we can check if you're entitled to any tax reliefs or expenses as far back as 4 years!
If you’re still confused about your tax credits, give us a call or head over to our website for more information. We even have a 24/7 Live Chat service where someone is always on hand to answer your tax questions.