Making Cents with Liam Croke: Claim what is rightfully yours from taxman

Liam Croke

Reporter:

Liam Croke

Making Cents with Liam Croke: Claim what is rightfully yours from taxman

It is relatively easy to claim back tax on a number of expenses

When I ask people what their largest monthly outgoing is, the answers cover the usual suspects: mortgage, food, transport, crèche etc.

And if it’s after-tax income they’re talking about, they are correct. When they try to improve their monthly cash flow they focus on those items and they are right to do so.

Unfortunately, their starting point is wrong, because they ignore the biggest cost of most households: the amount they pay each year in tax. If, for example, a couple earns €90,000 each year, they get to keep only €58,849 of it. Some 34%, or €30,151 of their income, is being taken in income tax, PRSI and USC.

If this couple had a mortgage of €250,000 over a 25-year term, their repayments would account for 28% of their net annual income and just 19% of their gross income. So, taxes account for 34% of their gross annual salary, and their mortgage just 19%.

There are many other taxes, like property tax, VAT (the biggest source of indirect tax which accounts for around 6% of our gross incomes) fuel tax and so on. We pay about 10% of our gross incomes in indirect taxes, meaning the couple earning €90,000 have an effective tax rate of 44% - which is very high.

To put this in perspective and into real terms, anything this couple buys, from a litre of milk to a new car, they need to earn nearly double what the cost of the item is, to pay for it. The cappuccino with a price tag of €3 is, actually costing them more like €5.35. The car costing €10,000 is really costing them €17,857 because they have to earn that amount in order to net down to €10,000. And when you factor in the interest and maintenance costs, the price only gets higher.

But taxes are taxes and there is nothing we can do about them, they are unavoidable. Or are they?

There are some you just can’t avoid paying, but there are other tax reliefs available, that we can legally use and take advantage of, which can reduce our biggest annual outgoing, and over the next couple of weeks I’m going to outline ten of them for you.

Before I do that, I will say that it’s no secret what they are. You’ve probably heard of some of them, and you might have wondered at some stage whether they apply to you or not.

Lack of knowledge of the system or their eligibility or simply fear of engaging with Revenue keeps people from doing anything. But it is relatively easy to claim what is yours. And in fairness to Revenue, each year they are at pains to bring this to our attention.

Sometimes, when people do make submissions for tax reliefs and get refunds, they are delighted, and I understand that, but I’m not sure if getting your own money back is a cause for celebration.

Getting a refund from Revenue means you paid too much in tax, and they are just returning what’s rightfully yours. If you never get any refund, you know you have optimised your income and the reliefs available and haven’t paid any more tax than you need to, and that’s the position you want to get to. I have only room for two areas this week, but the other eight will follow in two further columns.

Flat Rate Expenses

Did you know you can claim an annual allowance to cover the cost of things like clothes, tools, equipment, even stationary, which are required to carry out your job, but are not covered by your employer.

This relief applies to a wide range of professions from dockers to doctors and the amount you can claim will depend on your occupation. The full list of those who qualify and the amount they are entitled to can be found on the Revenue’s website and is worth a look.

To claim this relief, simply create an account with Revenue, log into the myAccount section, click on the review your tax link, select form 12 and in the tax credits and reliefs section, choose flat rate expenses and add it as a tax credit for yourself – five minutes, job done.

If you’re a teacher for example, the net amount this could be worth to you each year is €207.

Remember if you’ve never made a claim for this allowance, you can go back as far as 2014 to do so, so those who haven’t could be due a refund of €828.

DIRT Refund

If you are over 65, single, and your annual income is below €18,000 or €36,000 if married, you are exempt from having to pay DIRT tax on your savings. Depending on the amount you have on deposit, you could be due a reasonable refund, but regardless of whether that is €1,000 or €10, it’s your money. Again, it’s very easy to complete and not time consuming either. You have to complete a separate form (DE2) for each account you have, and they can be found on the Revenue’s website or from the institutions you have money on deposit with.

Liam Croke is MD of Harmonics Financial Ltd,

based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie