9 SIMPLE WAYS TO SAVE TAX!
Where The Sunday Business Post employs the trick approach to the Halloween deadline, over at the Sunday Times they prefer to concentrate on the treat. It appears the annual deadline could become a cause for celebration, rather than fear of the boogieman.
“Taxpayers are being urged to get their affairs in order after new Revenue figures showed that 1.2m PAYE workers were refunded €497m last year, an average of more than €400 each because they paid too much tax,” the newspaper trumpets.
Alas, the joyful news is short-lived, as the article morphs into the more usual diet of “one of the toughest budgets in memory” and where “householders should be prepared for the worst”.
The newspaper reminds its readers property taxes will be imposed on all homes in 2012 by way of an initial household service charge of €100. The tax credit for bin charges will also be abolished, something that was worth a tax saving of up to €80.
“Stealth taxes will drive up the cost of insurance, adding 5% to premiums for car and household cover and 1% to the cost of life cover. The health insurance levy of €205 for adults and €66 for children will probably rise in 2012. Pension tax breaks are at risk too. A levy introduced in 2011 will knock 0.6% from the value of your retirement fund each year until 2014. Those in the top tax bracket could lose some tax relief on contributions from 2012. The cap on retirement funds may also be cut, so no one can retire on a pension of more than €60,000 a year.
“The tax squeeze means a two-income family with two children and PAYE earnings of €100,000 will pay 29.7% of it in tax this year, up from 23.8% three years earlier. This looks set to climb to well over 30% in 2012.”
So, what to do? Well, this is where the newspaper does throw out a few treats:
- Retire early
Anyone retiring before the end of the year can take a pension lump sum of up to €200,000 tax free, taxed at 20% between €200,000 and €575,000 and at 41% above that. The €575,000 threshold could fall to €300,000 if the Government follows up on its threat to cap pensions at €60,000 a year, hitting those anticipating a large pension with an additional tax bill of up to €57,750. The best advice: Get out now!
- Reclaim levies
Anyone engaged in seasonal work could be entitled to a refund of the health contribution paid in 2010 or the USC paid this year. The 4% health contribution kicked in on earnings of more than €500 a week in 2010 but there is no liability for those earning less than €26,000 in the year. This means you might have been levied for the weeks you worked and earned over €500 but when the year is averaged out, the deductions should entitle you to a refund.
In 2011, you will pay USC of 7% on earnings above €308 in any week but you can claim a refund if you earn less than €16,016 because your maximum rate of USC is 4%.
- Medical bills
Tax relief of 20% applies to most medical expenses, including hospital bills not covered by private health insurance and the cost of prescriptions up to €120 a month. Last year Revenue refunded €3.3m to more than 33,000 taxpayers for medical-related expenses.
- Back to college
Families can claim 20% tax relief a person on fees of up to €7,000 in the current academic year. This applies also to spouses who return to education as well as children.
- Preliminary tax
Falling profits should mean falling tax bills. Anyone who has suffered a large drop in earnings or revenue this year should not automatically decide to go for the safe option of paying the same amount of tax as last year for fear of late-payment penalties. A more prudent approach might be to pay an amount that reflects the fall in income plus a small amount on top to allow for some margin of error.
If you were married or entered a civil partnership in 2011, you could be entitled to a tax refund if your spouse or partner earns less than you.
“Suppose you earn €60,000 and married your spouse, who earns €30,000 at the start of the year. You will be taxed as single people in 2011, despite your marriage, leading to a combined tax bill of €17,112. You can then claim a refund of €588 because you would have paid €16,524 if you were assessed jointly as a married couple.”
- Bin charges
The tax credit of 20% – worth up to €80 on charges of up to €400 – is based on payments made in 2010. The previous government promised to phase this out after 2011 and there is absolutely no reason the present incumbent will reverse this.
If you began renting after December 7, 2010, you are not entitled to tax relief. Otherwise, you can claim a 20% tax credit on rent up to €1,600 in 2011, a tax saving of €320. Couples and those aged over 55, are eligible to claim even more. This credit is being phased out gradually and is due to be abolished in 2017.
Many PAYE workers ignore their entitlements to flat-rate expense allowances. These expenses are available to teachers, nurses, hospital consultants and many other people working in the public service who incur work-related costs.
As ever, talk to Anthony Casey of Noone Casey for advice on how to minimise your liabilities and generate those refunds.
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