So here we are again, digging around for eligible receipts to reduce our upcoming tax bill. Sometimes in the rush to complete the tax return on time, valuable tax-saving opportunities are missed. So here are a few ways for you to reduce your upcoming bill.
Pension contributions attract marginal rate tax relief
Particularly if you are a higher rate tax payer, it really is hard to beat a pension contribution or an Additional Voluntary Contribution to your company pension scheme. Pension contributions are one of the few remaining routes to gaining tax relief at the higher rate of tax. Yes, it takes a payment to access the tax relief, but this is a down payment on your future lifestyle. Think of it as a tax efficient investment in your own future. It’s important too to remember that there are several tax breaks associated with pensions,
Your contributions qualify for marginal (higher) rate tax relief within certain limits
Your pension fund grows free of all taxes – no DIRT or Exit tax applies
You can take a portion of your fund tax-free at retirement, with other tax mitigating strategies available in relation to the balance.
Make sure to claim all eligible medical expenses
Even though relief for medical expenses can only be claimed back at the standard income tax rate of 20%, this relief can really add up. Particularly if there is anyone in the house that is quite regularly unwell or has an ongoing medical condition. It’s important to remember here that you can claim on behalf of all your family members, and indeed in many cases where you are paying someone else’s expenses – for example costs incurred in the care of an elderly parent.
Most expenses are covered including visits to your GP, consultant visits, prescriptions, and physio visits etc. Standard dental costs are not covered, but if you are having major work done such as root canal treatments or crowns, these are included. Check with your dentist, who will be able to guide you as to what is covered.
The process is really simple and from our experience, the best way to manage this is to upload the information and receipts on to the Revenue website throughout the year. This can be done in tandem with health insurance claims, leaving you without a time-consuming exercise as you come up to the tax deadline.
Working from home relief
Now that working from home is so commonplace, you need to understand your eligibility for tax relief on some expenses like light, heat, telephone and broadband. If your employer does not pay you an allowance for your expenses, you can claim relief when completing your tax return. Remote working relief is available for up to 30% of the cost of heating, electricity and broadband for the days spent working from home.
Bike to Work Scheme
This might be considered a bit of a discretionary purchase, but if you want or need a bicycle, make sure you buy it in a tax efficient way. Where your employer “provides” a bicycle and safety equipment for you, you can claim tax relief under the Bike to Work scheme up to the value of €1,250. This is a significant saving as you save tax at your marginal rate, PRSI and USC. Electric bikes that require some assistance from the cyclist also qualify, up to an increased amount of €1,500. And yes, you can qualify even if you are working from home fulltime and you’re not obliged to use the bike every day. You’ll also hopefully get fitter in the process too…
And then there’s the rest…
There are numerous other reliefs and exemptions available, some of which may apply to you, so make yourself aware of all of the reliefs available. Whether you’ve kids in college, are renting out a room, you are taking a training course or are commuting on public transport to work, there are potential tax saving opportunities available to you. A little bit of preparation and carefully completing every section in the return just might help you to unlock some significant tax savings.
We all recognise that our taxes pay for our public services, and maybe a little grudgingly are happy to pay our fair share. But there are no awards handed out to people who don’t avail of all of the reliefs and credits available. Now is the time to ensure you don’t pay more than you need to for 2022.