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Tax Exemptions & Reliefs

 

Exemptions

The following are exempt from Income Tax provided specific conditions are satisfied:

  • Artists resident in a Member State or EEA Jurisdiction (prior to 2015 the relief was restricted to Irish resident artists) who produce original work that has cultural and artistic merit subject to a €50,000 (€40,000 in 2014) limit
  • Charities – investment and certain trade income
  • Awards made by the Hepatitis C Tribunal
  • Income arising on monies received from settlement of a civil action by a totally incapacitated individual. Income arising on monies received by permanently incapacitated individuals for damages following assessment by the Personal Injuries Board, from 2007 the return arising from the investment of these monies where the return is greater than 50% of the individuals total income and gains is also exempt.
  • Income arising from compensation payments made under an employment law enacted, in accordance with a decision of one of the relevant bodies listed below or made in accordance under a mediation process;
  • The Rights Commissioner
  • The Director of Equality Investigations
  • The Employment Appeals Tribunal
  • The Labour Court
  • The Circuit Court
  • Patent royalties paid to the inventor from inventions devised in Ireland prior to 24 November 2010
  • Sports organisations
  • Income from woodlands
  • Income received by Mna Tí in the Gaeltacht (Sceim na bhFoghlaimeoirí)
  • Income received by foster parents from the Health Service Executive or from another body where the payment is in accordance with similar law from another EU Member State (including educational fees, certain medical expenses and other exceptional payments where complex special needs arise). In addition payments for foster children 18 or over until the age of 21 or until they complete their full time education who suffer from a disability are also exempted.
  • Certain social welfare payments including payments to systematic short term workers i.e. people who do 3 days on and 2 days off work, or who work one week on and one week off.
  • Lump sum payments to claimants who worked in the Magdalene Launderies
  • Annual allowance paid to Reserve Members of An Garda Siochana

The exemption for Income Tax for the categories of income described below was extended to Capital Gains Tax. However, it is a requirement that the aggregate of the person’s income and gains must exceed 50% of their total income and gains in order to be exempted. The relevant categories of income and now gains are as follows:

  • Income and Gains derived from the investment of certain compensation payments received by permanently incapacitated individuals or a trust established for the benefit of one or more individuals.
  • Income and Gains derived from the investment of payments made to Hepatitis C and HIV victims
  • Income and Gains from compensation payments made to thalidomide children and the income derived from the investment of such payments
  • Compensation for certain living donors to cover compensation for expenses and loss of income relating to donations.

Disability Benefit

For 2012 and subsequent years of assessment the exemption from tax for the first 36 days of disability benefit or occupational injuries benefit has been removed.The period for applying for illness or injury benefit has been incraesed from 3 days to 6 days from 6 January 2014.

Maternity Benefit
Maternity benefit, adoptive benefit and health and safety benefit payments are treated as taxable income.

Childminding relief

Childminding relief is available where an individual minds up to three children (excluding their own children) in their own home. No tax will be payable on the childminding earnings received, provided the amount is not more than €15,000 per annum. If the childminding income exceeds this, the total amount will be taxable as normal under self-assessment. The annual minimum PRSI contribution for self-employed individuals of €500 per annum is payable.

Mortgage Interest Relief

Mortgage interest relief on loans taken out after 1 January 2013 has been abolished.
For pre 2013 loans interest relief can be claimed in respect of loans for the purchase, repair or improvement of a taxpayer’s main residence. Mortgage interest relief is allowed at source by the lending institution, the relief is granted by reducing monthly repayments, or by directly crediting the individuals account.

The maximum relief available is outlined in the table below

Individual Status First Time Buyers All Others
Single €10,000 €3,000
Married €20,000 €6,000

The relief is based on the lower of x% of interest actually paid or the maximum relief as outlined above.

Relief is available for seven years starting with the year in which mortgage interest relief is first claimed.

Rate of Tax Relief on Qualifying Interest

Tax Years

1 & 2

Tax Years

3, 4 & 5

 Tax Years

6 & 7[*]

 First time buyers (First 7 tax years of entitlement to tax relief on interest paid)

 Rate of tax relief

= 25%

 Rate of tax relief

= 22.5%

 Rate of tax relief

= 20%

 Non-First time buyers    Rate of tax relief = 15%

* Note: After year 7, the rates are those that apply to non-first time buyers

Exemption: Notwithstanding the rates of tax relief mentioned above, for individuals who purchased their first principal private residence on or after 1 January 2004 and on or before 31 December 2008, the rate of tax relief on the interest paid on the loan to purchase that property will, for the tax years 2012 to 2017, be 30%.

Rates and Ceiling for First Time Buyers

 Year purchased 2014 Rate 2014 Ceiling Individual  2015 Rate 2015 Ceiling 2016 Rate 2016 Celing 2017 Rate 2017 Ceiling
  2012  22.5%  €10,000  22.5%  €10,000  22.5% €10,000 20%  €10,000
  2011  22.5%  €10,000  22.5%  €10,000  20%  €10,000  20%  €10,000
 2010  22.5%  €10,000  20%  €10,000  20%  €10,000  15%  €3,000
 2009  20% €10,000  20%  €10,000  15%  €3,000  15%  €3,000
 2008  30%  €10,000  30%  €3,000  30%  €3,000  30%  €3,000
 2007  30%  €3,000 30%  €3,000  30%  €3,000  30%  €3,000
2006  30%  €3,000  30%  €3,000  30%  €3,000  30%  €3,000
2005  30%  €3,000  30% €3,000  30%  €3,000  30%  €3,000
2004  30%  €3,000  30%  €3,000  30%  €3,000  30% €3,000

 

Rates and Ceiling for Couples/Widows – First Time Buyer

 

Year purchased 2014 Rate 2014 Ceiling Individual 2015 Rate 2015 Ceiling 2016 Rate 2016 Celing 2017 Rate 2017 Ceiling
2012 22.5% €20,000 22.5% €20,000 22.5% €20,000 20% €20,000
2011 22.5% €20,000 22.5% €20,000 20% €20,000 20% €20,000
2010 22.5% €20,000 20% €20,000 20% €20,000 15% €6,000
2009 20% €20,000 20% €20,000 15% €6,000 15% €6,000
2008 30% €20,000 30% €6,000 30% €6,000 30% €6,000
2007 30% €6,000 30% €6,000 30% €6,000 30% €6,000
2006 30% €6,000 30% €6,000 30% €6,000 30% €6,000
2005 30% €6,000 30% €6,000 30% €6,000 30% €6,000
2004 30% €6,000 30% €6,000 30% €6,000 30% €6,000

 

 

Rates and Ceilings for Individuals – Non First Time Buyers

Year purchased 2014 Rate 2014 Ceiling Individual 2015 Rate 2015 Ceiling 2016 Rate 2016 Celing 2017 Rate 2017 Ceiling
2012 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2011 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2010 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2009 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2008 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2007 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2006 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2005 15% €3,000 15% €3,000 15% €3,000 15% €3,000
2004 15% €3,000 15% €3,000 15% €3,000 15% €3,000

 

Rates and Ceilings for Couples/Widows – Non First Time Buyers

Year purchased 2014 Rate 2014 Ceiling Individual 2015 Rate 2015 Ceiling 2016 Rate 2016 Celing 2017 Rate 2017 Ceiling
2012 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2011 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2010 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2009 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2008 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2007 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2006 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2005 15% €6,000 15% €6,000 15% €6,000 15% €6,000
2004 15% €6,000 15% €6,000 15% €6,000 15% €6,000

Non First Time Buyers

Mortgage interest relief on loans taken out after 1 January 2013 has been abolished. Relief for loans taken out up to 31 December 2010 terminates on 31 December 2017.

Home Renovation Incentive

The Home Renovation Oncentive provides tax relief for homeowners by way of income tax credit at 13.5% of qualifying expenditure on repair, renovation or improvements carried out to the homeoners main home by qualifying contractors.
Relief may be claimed on qualifying expenditure over €4,405 before VAT subject to a maximum spend of €30,000.
The lowest claim amount is €595 (€4,405 @ 13.5%) and the highest is €4,050 (€30,000 @ 13.5%).
The works may be phased and multiple payments to different contractors is allowed.

Qualifying works must be carried out on or after 25 October 2013 and up to 31 December 2015. Qualifying works carried out between 25 October 2013 and 31 December 2013 and paid for during that period will be treated as though they were paid in 2014 for credit purposes. Where planning permission is required and is in place prior to 31 December 2015, works carried out up to 31 March 2016 will qualify for relief.

The credit is payable over 2 years follwoing the year in which the work is undertaken. Unused tax credits may be carried forward to thw next tax year.

Howeowners must be LPT compliant.

Claims may be made for costs at the 13.5% rate of tax and it excludes anything subject to VAT at 23%.

Contractors must be registered fro VAT and be RCT compliant.

The home renovation scheme has been extended to rental properties in the State where properties are refurbished and let to tenants under leases registered with the Private Rental Tenancies Board (PRTB), and occupied within six months of the works being carried out..

The relief applies for works carried out after 15/10/2014 to 31/12/2014, any works carried out in 2014 are deemed to be carried out in 2015.

There are special provisions in place that allow for the conversion of one premises to two rental units. The effect of this is to allow the maximum claim of €4,050, to apply to each unit, although the minimum spend of €5,000 equally apples to each unit.

 Rented Residential Property

Mortgage interest relief for rented residential properties is available at  75% of the actual interest paid in the relevant tax year. This measure applies to new and existing mortgages.

In order to claim tax relief for interest paid owners of rented properties are obliged to register their property under the Residential Tenancies Act, failure to do so will result in interest relief being denied.

Home Carer’s Credit

A credit of €810 is available for married couples jointly assessed, where only one spouse is working and the other cares for children (with an entitlement to social welfare child benefit), individuals over the age of 65, or incapacitated individuals in their home. Where the carer’s income exceeds €6,700 no credit will be available, where the carer’s credit exceeds €5,080 in a year, the tax credit is reduced by one half of the amount of the excess over €5,080 (subject to a maximum of €810).

The credit is not available to married couples that are taxed as single persons. Neither is the tax credit available to married couples with a combined income of €42,800 and who claimed the increased standard rate tax band for dual income couples.

Carer Allowance

An individual can claim an allowance where he/she has to employ a person to take care of an incapacitated family member. The carer may be employed on an individual basis, or through an employment agency. The maximum allowance is €50,000 per annum for each incapacitated individual. The allowance is available at the marginal rate of tax. The allowance will be granted in the first year that the individual becomes incapacitated.

Covenants

Covenants to permanently incapacitated adults are fully tax deductible. Covenants to a permanently incapacitated minor child are fully tax deductible if paid by a person other than a parent. Covenants to individuals aged 65 or over who are not incapacitated are deductible subject to a 5% limit of the covenantor’s total income.

Medical Insurance

Tax relief on medical insurance premiums is granted at source and is given as a direct reduction in premiums. Relief is based on a standard rate (20%) deduction, and is granted on a current year basis.
From 16 October onwards the amount of relief is restricted to €1,000 for an individual and €500 for a child (under 18 or under 23 in full time education). An age related credit taht was available up to 1 January 2013 is being replaced with a risk equalisation credit.

Dental Insurance

Tax relief at the standard rate (20%) is available in respect of dental insurance premiums taken out for non-routine dental treatment.

Medical Expenses

Tax relief for un-reimbursed medical expenses incurred on behalf of a taxpayer and his family including “dependants”, may be claimed against the taxpayer’s income tax liability. Medical expenses include:

  • Doctor/hospital care and prescription medicines
  • Payments to Revenue approved nursing homes for dependants
  • Physiotherapy
  • Non-routine dental and opthalmic expenses
  • Routine maternity care including Caesarean sections
  • Qualifying medical expenses incurred on behalf of a dependent relative (which includes any individual over the age of 65 or permanently incapacitated individuals whether they are relatives or not).

Relief is granted by way of a tax credit at the standard rate of tax, except in the case of nursing home expenses which will be granted by way of an allowance at the taxpayers’ marginal rate of tax. A form MED2 should be completed in respect of non-routine dental expenses (this can be obtained from the dentist).

There is an exclusion for certain “non essential” cosmetic surgery from qualifying for relief. Cosmetic surgery qualifies for relief where it is provided for a physical deformity arising as a result of a congenital abnormality, a personal injury, or a disfiguring disease.

Relief for hospital stays are restricted to expenses necessarily incurred in connection with the services of a medical practitioner, or to diagnostic procedures carried out on advice of a medical practitioner.

Relief for Nursing Home fees qualify for relief provided the nursing home concerned provides qualifying nursing care on site on a 24 hour per day basis. Private contributions towards the fair deal scheme for nursing homes qualify for relief.

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Permanent Health Insurance

Premiums paid under approved permanent health insurance (PHI) schemes are tax deductible. The deduction cannot exceed 10% of the individual’s total income. Relief is granted as a deduction against total income and is effectively relieved at the marginal rate of tax. Any benefits received are taxable and therefore subject to PAYE.

Third Level College Fees

Tax relief is available at the standard rate for the cost of fees paid for approved courses in approved colleges. In addition to full time courses it includes fees paid for part-time courses on behalf of students who do not have a third level qualification. The relief also applies to post graduate fees paid for third level education in private and public funded third level colleges in non-EU Member States. Tax relief for undergraduate fees is also allowable for accredited private third level colleges in EU Member States.

Tax relief is available for repeat years, on individuals taking more than one course and for individuals already holding a third level qualification.

An amount of fees is disregarded for relief as follows:

 

Year Full-Time Courses Part-Time Courses
 2013 €2,500 €1250
 2014  €2,750  €1,375
 2015  €3,000  €1,500

 

Where families have two or more children in third level education on a full-time basis and where both are liable to the student contribution charge, tax relief at 20% will be available on the aggregate paid above the disregarded amount. The current student contribution charge is €3,000. The maximum relief available is €5,000. Any repayment of fees must be adjusted for.

Training Course Fees

Relief is available for fees between €317 and €1,270 paid in respect of Information Technology and Foreign Language courses, which are approved by FAS. These courses must be at least 2 years in duration and must not be a postgraduate course. This relief no longer applies to payments made on behalf of dependents.

Service Charges

This relief ceased from 31 December 2010.

Rent-a-Room Scheme

Where a room in a persons’ principle private residence (“PPR”) is let as residential accommodation and the gross annual rental income is less than €12,000 ( €10,000 prior to 1 January 2015) per annum, this rental income is exempt from tax. Where it exceeds €12,000 the rent is taxable in full.

Qualifying room rentals will not affect entitlements to claim mortgage interest relief. It will also not effect CGT relief on Principle Private Residence on the disposal of the dwelling, and will not lead to a stamp duty claw-back. The relief will not apply where the letting is between connected parties and rent relief is being claimed.

The relief will not be available where the person in receipt of the income is an employee of the person making the payment.

Rent Relief for Private Accommodation

Rent paid in a tax year for private residential accommodation will qualify for tax relief in that year. The relief will be granted by way of a tax credit at the standard rate of income tax i.e. 20% subject to certain limits. The credit is worth a maximum of €640 per annum to single/widowed persons and €1,280 to married/widowed persons who are aged 55 or over. The credit is worth €320 to a single person and €640 to a married couple under the age of 55.

The maximum available is as follows:

  Under 55   Over 55  
 Single  €1,600 €3,200
 Married/Widowed  €3,200 €6,400

The credit does not cover rent paid to certain public authorities or rent in respect of a letting for a period of 50 years or more.

The relief is to be phased out over a seven year period for tenants who on the 7th December 2010 were paying qualifying rent under a qualifying tenancy. The relief is due to be withdrawn in full for the tax year 2018 onwards. New tenants are precluded from claiming the relief from 8 December 2010.

Donations

Relief is available to individuals and companies in respect of donations to approved Charities/Educational Establishments (minimum €250). These include

  • certain disadvantaged schools and donations to the state.
  • charities, both domestic and third world
  • first and second level schools and third level institutions both domestic and International
  • donations to an approved sporting body used to fund expenditure on an approved project

There is a restriction on the amount of tax relief available to an individual, this caps the amount of the contribution at 10% of the individuals total income for the year of assessment.
In addition to this cap, with effect from 1 January 2013 there is an annula €1m cap on the amount of donation. From 2013 all tax refunds will be granted directly to the approved body at a rate of 31%.

Gifts may comprise of public quoted shares and securities.

A tax credit may be available for a gift of a heritage item to an approved body. The relief is restricted to 50% (80% pre 2013) of the market value of the heritage item. The relief includes property, heritage gardens and accompanying buildings. The relief requires the consent of the Minister for Public Expenditure & Reform. The maximum credit available is capped at €6m in any one year with a minimum donation of €150,000 (or where there is a collection a single item of €50,000).

High Earners

Certain tax breaks available to high income earners are restricted with a tapering restriction applying to individuals with income in excess of €125,000 to ensure a minimum effective tax rate of 30%.

Taxable income is calculated by restricting qualifying deductions to 20% of the taxable amount.

If the individuals’ income is less than €125,000 or if the reliefs claimed are less than €80,000 the restriction will not apply.

There is a full restriction on income in excess of €400,000. Where there is a claim for specified relief in excess of €80,000, the amount that may be claimed is limited to the greater of €80,000 or 20% of the adjusted income.

A tapering relief applies to income between €125,000 and €400,000.

The following items specifically need to be considered:

  • Calculation of double taxation relief and top slicing relief is applied before the relief to be claimed.
  • Credits for any relief’s or deductions are given before the application of the restriction (but after the carry forward of excess relief’s from prior periods).

The effect of the restriction is to disapply the age limit for income tax.

There is a temporary removal of the high earners restriction from the Employment and Investment Incentive (EII) for share subscriptions amde between 16 October 2013 and 31 December 2016.
From 1 January 2014 there is an extension of the high earners restriction to plant and machinery allowances used in a manufacturing trade where they are claimed by passive investors in a leasing trade.

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Artists Exemption

Artist’s exemption is also limited to €40,000 from 2011 owwards.

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