Tax Credits & Tax Relief

What are tax credits?

Tax credits reduce the amount of tax you pay.

What are tax reliefs?

Tax reliefs reduce the amount of income that you pay tax on.

The tax credits and reliefs you are entitled to depend on your personal circumstances.

How do tax credits work?

Tax is calculated as a percentage of your income. Your tax credits are deducted from this to give the amount of tax that you have to pay. A Tax Credit will reduce your tax by the amount of the credit.

Everyone is entitled to a personal tax credit. There are personal tax credits for:

·        Single people

·        People who are married or in a civil partnership

·        People who are widowed or are surviving civil partners

If you are in employment, getting a pension or getting a taxable social welfare payment  (such as Jobseeker’s Benefit) you are also entitled to the Employee Tax Credit  (formerly known as the PAYE tax credit) of €1,875.

So, for example, if you are single and in employment you are entitled to an annual personal tax credit of €1,875 and the Employee Tax Credit of €1,875. When the total amount of tax you owe is calculated, both of these (€3,750) will be deducted from it.

This means that if you earn €18,750 or less you do not pay any income tax (because your tax credits of €3,750 are more than or equal to the amount of tax you are due to pay). However you may need to pay a Universal Social Charge (if your income is over €13,000) and PRSI (depending on how much you earn each week).

If you are married or in a civil partnership, you have the option of sharing tax credits and tax bands between you and your spouse or civil partner. If one spouse or civil partner works in the home, caring for one or more dependent people, you may be able to claim a Home Carer Tax Credit.

How do Tax Allowances work?

In some cases, you can get a tax refund for specific expenses, for example, medical expenses or mortgage interest.

The value of a tax allowance will depend on whether it is allowed at the highest rate of income tax that you pay or is restricted to the standard 20% rate. Take the example of a claim of €100. If you pay tax at 40% and you can claim it at this rate, then it will reduce your tax by €40 (€100 x 40%). If the highest rate of tax that you pay is 20%, or the relief is restricted to the standard rate, then the claim of €100 will reduce your tax by €20 (€100 x 20%).

Tax Credits and Allowances for specific circumstances

One-parent families

If you are caring for a dependent child on your own you can claim theSingle Person Child Carer Credit in addition to your personal tax credit. There is also an increase in your standard rate tax band. This means that you can earn more before you start to pay the higher rate of tax.

People Aged 65+ Years

If you are aged 65 or over, you are liable to pay income tax in the normal way. However, there are tax exemption limits for people aged 65 or over and there are some extra tax credits. It is possible to get tax relief for covenants to people aged 65 and over.

Employment-Related Tax Reliefs

Contributions to a pension are eligible for tax relief at your highest rate of tax.

1 - Working from home

You may be able to claim tax relief on additional costs of working from home, including electricity, heating and broadband. Your employer can pay you a contribution towards these costs or you can make a claim for tax relief during the year or after the end of the year. This is a link to more information on this relief. Click here.  However, the cost of items you buy, such as office equipment, is not eligible for Remote Working Relief.

2 - Expenses

Some work expenses can be deducted from your income before it is assessed for tax. To qualify, the expenses must have been necessary in order to do your work and must have been spent entirely for that purpose and no other.

A mileage allowance that you receive for the use of your car for business purposes is not taxable if it does not exceed the civil service mileage rates.

There is no tax relief on expenses for getting to or from work.

The Bike to Work Scheme  is a tax incentive scheme which aims to encourage employees to cycle to and from work. Under the scheme employers can pay for bicycles and bicycle equipment for their employees and the employee pays back through a salary sacrifice arrangement of up to 12 months. The employee is not liable for tax, PRSI or the Universal Social Charge on their repayments. For more information on this scheme, click here.

The Revenue has a list of expenses that can be deducted. To see the list, click here.

3 - Pension contributions

If you pay into a pension, you can get tax relief on your pension contributions. You pay tax on the pension when you receive it. The rate of tax relief on your pension contributions is at the highest rate of income tax you pay, known as the marginal rate.

There are various rules that pension schemes must meet to get the tax relief and there is a limit to the amount of the relief.

4 - Cross-border workers

If you live in Ireland and commute daily or weekly to your place of work in another country where you pay tax, then you may qualify for Trans-border Workers Relief. This reduces your tax in Ireland to take account of the tax that you have paid abroad. It does this by reducing the tax you pay in Ireland on your total income so that it is in proportion to the amount of income from Irish sources. For example, take the case where your total income was €50,000, of which €5,000 was earned in Ireland and the remainder (€45,000) was earned and taxed abroad. The proportion of your total income that is Irish income is 1/10 (5,000 divided by 50,000). Your Irish income tax liability is calculated as usual on the full amount of your income, €50,000. But under Trans-border Workers Relief, this amount of tax is then divided by ten to give the tax that you have to pay in Ireland.

5 - Housing tax reliefs

If you rent a room in your home to a private tenant you may claim Rent A Room Relief – click here for more information on this scheme. 

If you pay a mortgage, you might be entitled to tax relief on your mortgage interest. Click here for more information on this scheme.

If you pay rent, you may qualify for the Rent Tax Credit. This lowers the income tax that you owe by the amount of the Rent Tax Credit. The amount of the credit is 20% of your rent payments in the year, up to a maximum credit of:

€750 for an individual

€1,500 for a couple

If a smaller amount would reduce your income tax to zero, that amount is the maximum credit you can get. For 2022 and 2023, the credit was €500 for an individual and €1,000 for a couple. If a number of tenants pay the rent for a property, each individual or couple can claim the Rent Tax Credit for the rent they pay. It does not cover:

·        A security deposit

·        Repairs or maintenance

·        Board, laundry, utilities or other services

Your tenancy must be registered with the Residential Tenancy Board (RTB). In some cases, only the types of tenancies that are required to be registered with the RTB are eligible for the credit, so rent-a-room or digs arrangements are not included. You will be asked for the RT number when you apply for the tax credit. If you cannot provide the RT number when you apply, Revenue may ask you for it later. Your landlord must not be:

·        A housing association or approved housing body

·        A local authority

·        Your parent

·        Your child

6 - Education

Tax relief is available on fees paid for approved third-level courses. Click here for more information on this scheme.

7 - Medical expenses

If you pay medical expenses that are not covered by the State or by private health insurance, you may claim tax relief on some of those expenses. Click here for more information on this scheme.

Tax relief is also available for premiums paid for health insurance. The practice is for the insurance company grants this tax relief at source.

8 - Tax credits for coeliac and diabetic specialised food

If you're a coeliac or a diabetic and have to follow a specialised diet, then chances are you know how expensive food items can be.  As a result, you can claim tax relief on the cost of food that's specifically tailored for these types of diets. To qualify for this relief, you will need:

·        To be diagnosed by your doctor as a diabetic or coeliac,

·        A letter from your doctor stating that they have advised you to maintain a diabetic or coeliac diet

It's important to note that while claiming these credits and reliefs can result in a tax refund, it's not always the case. In some situations, you may have to make a repayment to Revenue. For example, if you've claimed relief on medical expenses but later receive a refund from your health insurance, you may need to pay back some of the relief you received.

Tax Credit Rates

This Revenue sets out the main tax credits and rates at this address – click here.

Claiming Tax Back

You can claim your income tax refund by submitting a tax return to Revenue. If you're employed, your employer will deduct tax from your salary throughout the year. If you've overpaid tax, you can claim it back by completing a tax return.

Bear in mind that if you are claiming a refund, you will need to keep copies of all your bills and expenses as proof of expenditure. If you are claiming the work from home allowance, you should also get written correspondence from your employer to state that you were working from home and are therefore eligible to submit a claim for it.

To submit a claim you can:

1       Sign into the MyAccount section on Revenue’s website

2       Under PAYE Services, click on ‘Review your tax’ 

3       Request a Statement of Liability

4       Click on 'complete income tax return'

5       Claim additional tax credit, relief or expenses and submit your form