Ireland Revenue assesses taxes on your income, but if you’re savvy, there are many different ways to reduce your tax liability. Want to keep more of your money in your pocket? Then, check out these tax-saving strategies:
1. Claim tax relief on qualifying expenses.
Ireland Revenue offers tax relief on a variety of expenses. Acquaint yourself with the expenses that you can claim relief on, and then, save your receipts. You don’t need to remit receipts with your return, but you’ll need them if Revenue decides to check your claims.
You can claim relief on the following:
- Tuition for third-level education up to €7,000 per course, per person, per academic year.
- Qualifying health expenses including doctor’s services, hospital care, ambulance transport, IVF treatments, acupuncture, non-routine dental care, and mental health treatment from a psychologist or psychotherapist.
- Equipment required for work by claiming the flat rate expense allowance.
- Maintenance payments made to a former spouse, but not payments designated for child support.
2. Reduce your tax liability with credits.
A tax credit reduces the amount of tax you need to pay, and unfortunately, countless credits arent claimed every year. To shave down your tax liability, look for credits and make sure that you claim them. Here are just a few of the available options.
- The home carer tax credit for couples where one spouse or partner stays home to care for children.
- The age tax credit which is available to people aged 65 years or older.
- The widow with children credit which provides help for up to five years for widowed parents of dependent children.
3. See if you qualify for an income tax exemption
If you or your spouse is over age 65, you don’t have to pay income tax if your income is below a certain threshold. As of 2023, the threshold is €18,000 for a single person and €36,000 for a married couple. If you’re raising dependents, you can add an additional €575 for the first two children and €830 for any subsequent children.
4. Start a pension
When you contribute funds to a pension, you save up for your future, but you also get to enjoy tax benefits right now. Pension contributions are pre-tax. That means if you contribute €1,000, for example, you don’t face any tax on those funds.
If you’re taxed at the highest rate of 40%, you would have normally paid €400 in tax on that income. However, by putting the funds into your pension, you avoided that tax liability.
5. Rent a room to a long-term tenant
With Revenue’s Rent-a-Room Relief program, you can earn up to €14,000 per year tax-free. To qualify, you just need to rent out a room in your home on a continuous basis to someone who is not your partner, children, or employer.
Generally, you can only claim the relief if you rent out the room for at least 28 days. However, there is an exception for incapacitated individuals who need respite care, full and part-time students, and four-day-a-week digs. Your income may also need to be below a certain level to qualify for this relief.
Note that you can deduct qualifying expenses from your rental income. For instance, if you collected €15,000 in rent but spent €1,000 maintaining the room, you only have a net gain of €14,000 which is all exempt from tax. This relief doesn’t apply if you rent out your home through a short-term vacation rental site — that income is taxable.
6. Try biking to work
Through the Bike-to-Work Scheme, you can buy a bicycle, helmet, and all of the other critical accessories with tax-free funds. Participating employers pay for the bike upfront. There’s a €1,250 allowance for most bikes, €1,500 for e-bikes, and €3,000 for cargo bikes.
Then, you sign an agreement stating that you’ll use the bike for your own purposes and to get to and from work. Finally, your employer deducts your repayments from your checks for the next 12 months, but you don’t incur any tax on those amounts. In four years, you can repeat the process and get another new bike using tax-free income.