Tax relief: Expenses you can claim to try reduce your bill

If you were one of the 633,600 taxpayers who got bad news from the Revenue last week about your tax affairs, you may be looking for a silver bullet to wipe away that tax liability. And if you were one of the 706,100 who are actually due a refund, you might enjoy that feeling so much that you'd like to increase your pay-out.

For those who have been hit by tax on the Covid wage subsidies, if you haven't done so already, it's probably worth asking your employer would they consider footing the bill. Otherwise, now is the time to claim any credits that you are owed to either pay down your tax liability or boost your refund.

Remember the four year rule: this means that you can claim back any reliefs/credits owed for the past four years. So, if you haven’t claimed any of the below since 2017, you will still be able to claim back, where eligible, for the four years from 2017-2020, thus substantially boosting any refund you may be owed.

1. Medical expenses

This is typically the most common relief you can claim. It allows you to claim back 20 per cent on eligible medical expenses (and 40 per cent for nursing home fees), once any refunds you may have received from your health insurer, are deducted. You can claim back expenses on behalf of anyone, provided you paid for them.

Qualifying expenses include visits to a doctor/consultant, maternity services, physiotherapy and podiatry.

You can also claim back money on visits to the dentist, but not on routine treatments such as fillings or cleaning. Eligible treatments include crowns, root canal treatment and orthodontics such as braces etc.

For non-routine medical expense you will need your dentist to complete a Med 2 form for you. While Revenue won’t ask you to send this as part of your return, you should get it completed and keep it in your records in case it checks your claim at a later stage.

2. Flat rate expenses

This can generate significant relief if a) you’re eligible; and b) you haven’t claimed it in the last four years.

Ostensibly, the expenses were introduced years ago to cover the cost of certain expenses employees incur in the course of their profession or trade. Professional musicians, for example, are entitled to annual relief of €2,476, while hospital consultants are eligible to claim relief of €695 a year, and teachers €518.

Back in 2018, the then Government said it was withdrawing relief from more than 85,000 people, including agricultural advisers and journalists. However, the issue became the subject of a review, and the changes were subsequently due to be introduced this January. With the pandemic however, Revenue now says it will defer the implementation of any changes until January 2022.

In short then, for 2020, the expenses still stand, so if you’re eligible make sure you claim.

The expense regime works by allowing you to claim tax relief on the flat rate. So, for example, the teacher getting €518 a year will pay €207.20 less in tax a year (based on tax @40 per cent; tax at 20 per cent would give relief of €103.60).

And if the teacher hadn’t claimed the relief in the past four years, they would be owed up to €828 back.

You can check if you are eligible for such an expense and, if so, how much you can claim, here.

3. E-working relief

The big savings here come if your employer has agreed to pay you a €3.20 daily stipend towards your work from home costs, which comes to about €750 a year – tax free. However, it seems that almost one year into the pandemic, most employers haven’t taken this route.

You'll get a certain proportion back towards your overall costs based on the number of days you worked from home

So, the option available to most people is to look for tax relief on their work from home expenses. Unfortunately however, while it was enhanced this year, it’s unlikely to make a significant dent on your tax bill.

You can claim tax back on the expenses you’ve incurred, such as heat, electricity, and broadband, but it won’t be a huge amount. And you can’t claim back money spent on capital goods such as desks and chairs.

Basically, you’ll get a certain proportion back towards your overall costs based on the number of days you worked from home. So, based on annual gas and electricity bills of €1,872, and days worked from home of 185, you’ll come up with €948. But you can only get 10 per cent of back (so €94.80), and this is treated as a tax credit so, depending on whether you are on the 20 per cent or 40 per cent income tax rate, it is worth just €18.96 or €37.92 to you.

You can also add broadband costs to these, which might earn you a further €30 or so back.

For further information on claiming this relief see here.

4. Stay-and-Spend

It might have been a good idea at the time; incentivise taxpayers to help out the Irish hospitality sector by offering tax relief on the amount they spend. However, the State went into various stages of lockdown soon after the scheme was introduced (October 1st), with hospitality closing, particularly in Dublin. That means most people will not have receipts for enough spending to be eligible for the claim.

The credit provides for a 20 per cent rebate on the amount you spend up to €625. So, if you have spent up to €625 on the scheme (or €1,250 for jointly assessed spouses) and saved your receipts, you’ll now be able to claim back €125 (€250 for a couple), which isn’t insignificant, when compared with other reliefs.

The credit is eligible on spending in a broad range of hospitality establishments, including hotels, B&Bs, caravan parks, restaurants, pubs and cafes. There are exclusions however, including alcohol, and take aways.

Just because you're a stay at home parent or carer doesn't mean the credit will automatically be worth your while

You will only be able to claim for expenditure from October 1st -December 31st last year for your 2020 income tax form. Anything you have spent since then, or will spend until April 30th, when the scheme is due to end, can be claimed in your 2021 tax return.

And it may be extended. On January 13th, Minister for Finance Paschal Donohoe told the Dáil that the flexibility exists for him to extend it, but that it is "too early as yet to take any decisions in that regard".

While stuck inside, you can plan where you might spend (if you get a chance) here.

For more on how the scheme works see here.

5. Tuition fees

If you have children in third level education, you may also stand to benefit from tax relief on fees paid for undergraduate, postgraduate and some IT and foreign language courses. Tax relief is given at the standard rate of 20 per cent, which means you’ll get 20 per cent back on the cost of fees, but remember the first €3,000 in any year – a figure equivalent to the student contribution for full-time courses – is not allowed. If you only have people doing part-time courses, the “disregard” is €1,500.

6. Home carer credit

Figures show that this is a credit that isn’t claimed often enough. It offers an incentive to stay-at-home partners, who are caring for a dependent person such as a child or elderly relative. Given many people’s experiences of losing their job or cutting back on their hours to care for children or relatives over the past year, many more people may be entitled to this for the first time in 2020.

The credit currently stands at €1,600 and effectively wipes this amount off your annual tax bill. And the carer can still bring in an income while claiming the credit: they can earn up to €10,400 a year while claiming the credit, although it is paid at a lower amount once the carer’s earnings exceed €7,200.

Just because you’re a stay at home parent or carer however, doesn’t mean the credit will automatically be worth your while. This is because you can’t claim both the higher cut-off point for the standard rate of tax, and the home carer credit. This allows the spouse who works outside the home to pay tax at 20 per cent on earnings of up to €44,300, so when income is of this level or above, it typically makes more financial sense to claim this, so do your sums before you apply for the home carer credit.

7-9. Changes in circumstances

You may also find that you could be in line for a tax refund if your circumstances changed during 2020.

For example, if you turned 65 last year (7), you can claim the age tax credit (€245). Getting married (8) can also sometimes offer a boon to your taxes. This will depend on incomes. However, typically, where two people are earning around €35,300 (the standard rate band) a year or more each, there is no real benefit. If one earns less than this, there can be a benefit in notifying Revenue of this change and getting your taxes jointly assessed.

Another potential benefit can arise if you became entitled to a full medical card last year, or turned 70 (9). A reduced rate of USC applies to those in this cohort, provided earnings are €60,000 or less, of 0.5 per cent up to €12,012, and 2 per cent on the balance.