Totting up expenses and offsetting will save you in the long run
The self-assessed may be deprived of many social welfare benefits (see Q&As). But they can reduce their tax bill by writing off expenses.
For example, if you rent a threebedroom home and need one room for an office, that portion of the rent could be offset against tax. It’s more complicated if you own your home as designating part of your house as a business would generate tax complications. For starters, you could be liable for capital gains tax if you sell your home. However, you can still claim for lighting and heating expenses. Motoring expenses, if you use your car for work, are also allowable.
If you have rental income, are you claiming all your deductions for capital allowances and letting expenses?
Airbnb is a really handy and lucrative source of income for Irish homeowners but you will be liable for tax and the designation of your home as a principal private residence for capital gains tax purposes may be compromised.
Those with non-PAYE income over €5,000 a year must fill out a Form 11. Below that sum and it’s Form 12. What you can write off against tax depends on whether you’re classed as a trader or not. According to Revenue, a trader rents out a room more than six times a year or for more than 30 nights over 12 months. Non-traders can write off only expenses directly incurred in the letting, such as heat, light and laundry costs. Traders can write off capital expenses such as mortgage interest, capital investment and ‘wear and tear’ on fixtures and fittings. A far better option is the rent-a-room scheme, whereby you can earn up to €14,000 a year renting out rooms in your house free of income tax and capital gains tax complications. The scheme would cover renting a room to a student for the academic year.
Like PAYE taxpayers, you should
also claim your credits. The most neglected ones – such as medical and non-routine dental expenses – are common to both sectors, so read on, PAYE workers!
Spouses working in the home can claim a Home Carer’s credit that’s worth €1,100 this year and €1,200 from next year – straight into your pocket. Yet a taxback.com survey showed that close to two-thirds of qualifying families fail to claim this valuable break. The €1,100 credit can be claimed by any married couple, where one spouse is the home carer for one or more dependent persons, which includes children.
Tax relief at 20% on tuition fees (including the student contribution) is another underclaimed tax break. It’s applicable on any amount above €3,000, with a €7,000 limit. Other entitlements are breaks for carers looking after children and relatives and the incapacitated child tax credit.