Unlocking Tax Savings: Your Comprehensive Guide to Reducing your Tax Bill

As the Income Tax Return deadline approaches this October, many individuals find themselves facing the prospect of taxes owed to Revenue. But fear not! In this informative blog series, we delve into a variety of strategies and opportunities to empower you in minimising your tax obligations.

Claim Credits

There are a number of tax credits available to claim that are not always clearly advised. We have listed some of the most ‘lesser’ known tax credits below.

Marriage Credit

If you got married in the year 2022, you may be eligible to take advantage of the Year of Marriage Tax Credit, a potentially lucrative opportunity worth exploring. In the tax year 2022, you and your spouse will continue to be taxed as if you were two separate individuals. However, this arrangement may work to your advantage, potentially leading to a tax refund.

To qualify for this refund, you need to demonstrate that you paid more in taxes as two single individuals than you would have paid as a married couple. If you meet this criteria, you can expect to receive a refund for the portion of the year in which you were married.

For instance, let’s say you and your spouse each paid €10,000 individually, totalling €20,000 in taxes for the year 2022. However, if your tax bill as a married couple would have been €16,000 in total, you can potentially claim a refund for the difference of €4,000 owed to you. The exact amount of relief you receive will depend on how long you were married during the year 2022. For example, if you were married for 6 months in 2022, you could qualify for a €2,000 tax relief.

Home Carer Credit

The Home Carer Tax Credit is a valuable tax credit designed for married couples or civil partners who are assessed for tax jointly. This credit is aimed at supporting households where one spouse or civil partner fulfills the crucial role of caring for a dependent individual within the home environment.

A dependent person, for the purposes of this tax credit, includes:

1. A child who qualifies for Child Benefit payments.
2. An individual aged 65 or older.
3. A person with a disability who requires care.

For the tax year 2022, the Home Carer credit has the potential to significantly reduce your tax liability, offering a direct tax reduction of €1,600. However, there are specific eligibility criteria to consider. To qualify for the full relief, the home carer’s annual income must not exceed €7,200. Nevertheless, it’s important to note that in 2022, they can earn up to €10,400 and still enjoy partial tax reductions.

Concurrently, the other partner in the marriage or civil partnership may find it more advantageous to benefit from the higher income threshold associated with the standard rate of tax, depending on their individual earnings.

Rent Credit

Rent Tax Credit is applicable for rent you have paid in the tax years 2022 through 2025 for the following;

• Your primary residence.
• Another property you use to facilitate your work attendance or attendance in an approved course.
• A property used by your child to facilitate their attendance in an approved course.

To qualify for the Rent Tax Credit, you must have an Income Tax liability for the relevant year to offset it against, if your liability is less than the credit you cannot utilise it fully.

Tax relief is available at 20% and is calculated as follows;

• €1,000 for a jointly assessed couple
• €500 for all other cases

To claim this credit, your landlord must be registered with the Residential Tenancies Board (RTB) as you may be required to provide an RTB number.

Working From Home Credit

If you were employed and worked from home during the year 2022, you have the opportunity to claim an allowance, assuming your employer hasn’t already provided one.

For the tax year 2022, you’re eligible to claim a portion of your light, heat and broadband expenses, amounting to 30% of these costs.

For those who are self-employed, further expenses that can be partially deducted include various categories such as lighting, heating, telephone, broadband, and even home insurance. While there’s no strict rule, it’s essential to ensure that your deductions are reasonable to avoid any potential red flags.

 

 

Follow our blog guide for more ways to reduce your tax bill for 2022.

If you need assistance in completing your Income Tax Return, contact us on 01 5397999 or through our website www.itasaccounting.ie