These are 10 Tax Saving Tips for your 2023 Returns. The filing date, at the time of writing this, is 6 days away. But you have until the 14th of November, if paying and filing online through ROS.
You must file an Income Tax return under certain circumstances. These include being self-employed or a company director who owns 15% or more of a company. Also, if you have investment or rental income, you’ll most likely need to file a return. So, if you haven’t engaged with your advisor yet you need to get cracking.
- The Deadline
- Mortgage Interest Credit
- Rent Credit
- Medical Expenses
- Medical Insurance Credit
- Remote Working
- Pensions
- Tuition Fees
- Home carer Credit
- Flat rate expenses
The Deadline
I mentioned the deadline for your 2023 Income Tax Return above being the 31st of October 2024. The extension to that deadline is the 14th of November 2024, if you pay and file on ROS. Remember you have to do both to avail of the extended deadline. If you don’t have the funds to pay, you should file by the 31st of this month.
But these dates are also the deadlines for your 2023 Capital Gains Tax Return. And your Gift/Inheritance [CAT] Tax return for the year ended 31st of August 2024. These are for gifts or inheritances received in the period from 1 September 2023 to the 31st of August 2024. If you miss your tax return date, then you are into surcharges.
- 5% of the tax liability if you file within 2 months and
- 10% of the tax liability if you file later than 2 months
An important point to remember is that the 2 months start from the 31st of October and not the 14th of November. Company Directors who own 15% or more of a company need to be especially careful. The surcharge is more penal for them as it applies to their tax liability before deducting PAYE.
Company Director
Amanda Legg owns 25% of Legg Up Ltd and has a salary of €100,000 for 2023. She paid €30,000 PAYE on that salary. She also has a rental property that had a profit of €5,000 in 2023. Amanda misses the Income Tax deadline and files her return on the 5th of January 2025. Her surcharge is
| Final Tax liability for 2023 | €2,500 |
| Tax liability before deducting PAYE | €32,500 |
| 10% Surcharge | €3,250 |
And don’t forget your Capital Gains Tax [CGT] return either. You may have paid the tax in full in December 2023 or at the end of January 2024. But you still need to file a return, if you haven’t already done so. If you file a Form 11 Income Tax return, then you can file a CGT return as part of that one. But if you don’t, you’ll need to file a form CG1. The surcharges also applies to CAT and CGT.
Mortgage Interest Credit
The mortgage interest credit relates to the interest paid on your home mortgage. It doesn’t apply to a property you let. There are two questions to ask yourself
- Was the balance on your home mortgage between €80,000 and €500,000 on the 31st of December 2022
- Did you pay more mortgage interest in 2023 compared to 2022?
If you answer yes to both of those then this credit will save you some tax. The tax credit is 20% of the increase in interest paid in 2023 compared to 2022. There’s a cap for the credit of €1,250 which equates to an interest increase of €6,250
This credit will generally benefit those on tracker and variable-rate mortgages. Melanie Jones has a mortgage on her home and the balance at the end of December 2022 was €250,000. She’s on a tracker mortgage.
| Interest Paid in 2022 | €5,000 |
| Interest Paid in 2023 | €9,000 |
| Increase in interest paid | €4,000 |
| Mortgage interest credit @ 20% | €800 |
Melanie must file a tax return to claim the credit. The key is having your paperwork ready. You’ll need your Local Property Tax ID plus your interest certs for your home mortgage for 2022 and 2023. This was a once-off tax credit that was to apply for 2023 only. Now it will also apply for 2024, and you’ll compare the interest paid in 2024 to what you paid in 2022. To get the credit your Local Property Tax return and payments must be up to date.
Rent Tax Credit
For 2023 the rent tax credit is worth €500 to a single person or €1,000 to a married couple who are jointly assessed. The two main areas where we claim this for our clients are where either
- The client is renting their home or
- The client is paying for rented accommodation for their son or daughter in college
You can’t claim the credit if your landlord is your parent. Also, you won’t get it if you are a supported tenant receiving HAP. The tenancy must be registered with the RTB. When claiming for a child the child must be doing an approved course and be under 23.
To claim it you’ll need to provide certain details like the name and address of your landlord. Plus, the amount of rent you paid in 2023. To claim the maximum credit in 2023 a single person must have paid €2,500 and a married couple €5,000. The tax credit at 20% of those amounts is €500 and €1,000.
Medical Expenses
Tax relief for most medical expenses is at 20%. So, if you pay qualifying medical expenses of €1,000 that’s a tax saving of €200. The usual medical expenses we claim for clients are doctors, consultants, and prescriptions. We see some non-routine dental expenses coming through from clients too. These are usually braces for the kids or root canal treatment. You need a Med 2 form from the orthodontist to claim those costs.
To qualify the expenses must be from a qualifying medical practitioner. Expenses that don’t qualify for tax relief include
- Routine dental treatment such as fillings, extractions, and checkups
- Routing eye care such as glasses, contact lenses, and sight tests
- Cosmetic surgery in most cases
You can claim for physios and chiropractors once you are getting that treatment on the advice of your doctor or consultant.
We also have a few clients who pay Nursing home costs for their parents. The tax relief on nursing home expenses is at 40%. Given the cost, the tax relief is quite helpful. So, for €20,000 in Nursing home expenses in 2023, you’ll have a tax saving of €8,000. You can only get tax relief on the amount you spend. You don’t get tax relief on any amount covered by your medical insurance provider or the Fair Deal scheme.
It’s also possible to get 40% tax relief when you get a nurse into care for an elderly parent at home. Other costs you can claim are food expenses for diabetics and coeliacs.
Medical Insurance Credit
If your employer pays your medical insurance, you can claim this credit. It’s worth up to €100 for a child and €200 for an adult provided the gross premium is greater than €1,000 for an adult and €500 for a child. You may already get this credit through your annual tax credit certificate. You’ll get your tax credit cert for 2025 in December so check if you are getting this or not.
Legg Up Ltd pays VHI for Amanda, her husband Larry, and their two kids Tom [22] and Jack [15]. The gross premium is €3,600 for 2023 which is €1,200 each for Amanda and Larry, €800 for Tom, and €400 for Jack. The tax credit for the Leggs is
| Amanda max €1,000 x 20% | €200 |
| Larry max €1,000 x 20% | €200 |
| Tom [adult as over 18] €800 x 20% | €160 |
| Jack €400 x 20% | €80 |
| Total | €640 |
The credit is time apportioned over the year. If the company started paying the premiums from 1 April 2023 the credit you would be 9/12ths of €640 or €480.
Remote Working Relief
You can claim remote working relief if your employer doesn’t pay you the daily allowance of €3.20. If not, and you work from home, then this relief is for you.
The amount you get depends on your qualifying expenses for
- Light
- Heat
- Broadband
Pablo works 3 days per week from home for 44 weeks in 2023. His electricity costs came to €2,500 and home heating bills were €1,200. His broadband was €50 a month. To calculate the claim, you get 30% of those costs and apportion the number of days working from home over the days in the tax year.
| Electricity €2,500 x 30% | €750 |
| Heating €1,200 x 30% | €360 |
| Broadband €600 x 30% | €180 |
| Total | €1,290 |
| Remote working relief €1,290/365 x 132 | €467 |
| Tax relief for Pablo @ 40% | €187 |
The relief of €467 is an expense deduction from your total income. As Pablo is paying tax at 40% his tax saving comes to €187. Pablo would be better off if his employer paid him the daily allowance. €3.20 for €132 days is €422.
Pension
You can make a top-up contribution to your pension before the tax return date and save tax. It makes more sense to do this if you are paying tax at the higher rate of 40%. The key to getting tax relief is that the contribution must be paid and claimed before the filing deadline. So, you pay it before the 14th of November, and you claim it on your 2023 tax return.
This can apply to those who are self-employed and those in employment. If you only have investment income, like rent and dividends, you won’t be able to get tax relief. The best thing is to talk to your financial advisor to see what you can pay and if it makes sense for you. It can have a double cashflow benefit as it can
- Reduce your tax liability for 2023
- Reduce your preliminary tax payment for 2024
Example
Dan Keehotay is 45 and has employment income of €100,000 in 2023. He also has 2 rental properties that have a rental profit of €16,000. As a result, his tax liability for 2023 is €8,000. Without making any pension contribution his tax payments are as follows
| Final Tax liability for 2023 | €8,000 |
| Preliminary Tax for 2024 – 100% of 2023 | €8,000 |
| Total | €16,000 |
Dan doesn’t have a pension with his job, but he has a personal pension. He decides to make a €20,000 pension contribution at the end of October 2024. We include it in his 2023 Tax return, and it reduces his 2023 tax liability to nil.
| Tax liability for 2023 before pension | €8,000 |
| Tax relief on pension payment €20,000 @ 40% | (€8,000) |
| Final tax liability for 2023 | €0 |
| Preliminary Tax for 2024 – 100% of 2023 | €0 |
| Total tax payment | €0 |
You can get income tax relief on pension contributions but not relief from USC or PRSI.
Tuition Fees
Tax relief on tuition fees or college fees isn’t as prominent in 2023. If you have one child in college it won’t be relevant in most cases. That’s because the registration fee is below the minimum threshold of €3,000. But those who paid for private third-level colleges or distance learning may have paid more than that. The first €3,000 of a claim is ignored and there is also a ceiling of €7,000.
Amanda Legg’s son Tom is doing a Masters in Engineering at UCD. Amanda paid €8,150 for tuition fees in September 2023. The tax relief is as follows
| Amount paid | €8,150 |
| Max amount you can claim | €7,000 |
| Less first €3,000 of a claim | (€3,000) |
| Balance to claim | €4,000 |
| Tax credit @ 20% | €800 |
Poor old Dan Keehotay has two lads in college. Mark is at the University of Sheffield and Mary is in UCC. College fees for Mark in 2023 were £9,000 and were €3,000 for Mary but Dan got a €1000 refund for Mary’s fees. You would calculate the tuition fee credit as follows
| Mark’s fees £9,000/0.86 | €10,500 |
| Max claim | €7,000 |
| Add Mary’s fees | €3,000 |
| Deduct refund of Mary’s fees | (€1,000) |
| Total | €9,000 |
| Less first €3,000 of a claim | (€3,000) |
| Balance to claim | €6,000 |
| Tuition Fee credit @ 20% | €1,200 |
Remember that if you are getting a tax credit for tuition fees you may also get the rent tax credit for accommodation costs in Ireland.
Flat rate Expenses
Flat rate expenses are set expenses from Revenue that are available for certain jobs. These are for employees, and you should see the expense on your annual tax credit certificate. If it isn’t there you can add it through your myAccount or claim it on your tax return. An example of some of these are
| Teagasc Advisor | €671 |
| Hotel Manager | €191 |
| Nurse [supply & launder own uniform] | €733 |
| Teacher on full hours | €518 |
| Pharmacist | €400 |
The reason for these expenses is to cover certain employment-related costs. Examples would include tools, uniforms, and statutory registration fees.
A husband and wife who are both pharmacists could claim €800 of flat rate expenses. At the top tax rate of 40%, it’s a saving of €320.
Home Carer Credit
You can claim the home carer credit if you are married or in a civil partnership and care for one or more dependents. The dependent must either be a
- A child for whom you get the children’s allowance for
- A person who is over 65
- An incapacitated person owing to mental or physical disability
The credit applies where a spouse or civil partner is at home looking after a child. Typically, that spouse will have little or no income. Dual-income couples cannot claim both the home carer credit and the increased lower rate band. You claim what best suits your circumstances.
For 2023, let’s assume that Dan Keehotay’s wife Sheila is at home. Their youngest child Sam is 10 and they get the children’s allowance for him. Mary has no income. Dan can claim the home carer credit for 2023 which is worth €1,700. In 2024 the credit increased to €1800.
In 2024 Sheila got a part-time job working one day a week in the local school. Her income for 2024 was €5,000. Dan’s salary of €100,000 uses the maximum lower rate band for one spouse of €51,000. If they don’t claim the home carer credit Sheila’s income will be liable at the 20% rate
| Sheila’s Income | €5,000 |
| Tax at 20% | €1,000 |
But if they claim the home carer credit, then Sheila’s income is liable at the higher rate.
| Sheila’s Income | €5,000 |
| Tax at 40% | €2,000 |
| Less Home carer credit | (€1,800) |
| Tax liability | €200 |
As you will see they are better off by €800 when claiming the credit for 2024. Revenue will give whatever is most beneficial to you. But to enable them to do that you need to claim the home carer credit on your tax return.
Summary
The above is an example of some of the most common tax credits and reliefs that we see every day. The modern Income Tax return is larger and more complicated than ever before. It doesn’t make sense to do your own tax return. The best advice is to engage early with your tax advisor. They will help you reduce your tax liability as much as possible. And your advisor will answer any queries that Revenue have after you submit your return. But remember it is your responsibility to get your tax return right. Hopefully, some of these 10 tax savings tips will keep more money in your pocket. And if you are an owner-director of a company don’t miss the deadline.
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