- Exemptions
- Relief for the Long Term Unemployed
- Childminding relief
- Mortgage Interest Relief
- Home Carer’s Credit
- Carer’s Allowance
- Covenants
- Medical Insurance
- Dental Insurance
- Medical Expenses
- Permanent Health Insurance
- Trade Union Subscriptions
- Third Level College Fees
- Training Course Fees
- Service Charges
- Rent-a-Room Scheme
- Rent Relief for Private Accommodation
- Donations
- High Earners
- Artists Exemption
Exemptions
The following are exempt from Income Tax provided specific conditions are satisfied:
- Artists resident in Ireland who produce original work that has cultural and artistic merit subject to a €40,000 limit
- Charities – investment and certain trade income
- Awards made by the Hepatitis C Tribunal
- Income arising on monies received from settlement of a civil action by a totally incapacitated individual. Income arising on monies received by permanently incapacitated individuals for damages following assessment by the Personal Injuries Board, from 2007 the return arising from the investment of these monies where the return is greater than 50% of the individuals total income and gains is also exempt.
- Income arising from compensation payments made under an employment law enacted, in accordance with a decision of one of the relevant bodies listed below or made in accordance under a mediation process;
- The Rights Commissioner
- The Director of Equality Investigations
- The Employment Appeals Tribunal
- The Labour Court
- The Circuit Court
- Patent royalties paid to the inventor from inventions devised in Ireland prior to 24 November 2010
- Sports organisations
- Income from stallion services (no longer applies after 31 July 2008)
- Greyhound fees (no longer applies after 31 July 2008)
- Income from woodlands
- Income received by Mna Tí in the Gaeltacht (Sceim na bhFoghlaimeoirí)
- Income received by foster parents from the Health Service Executive or from another body where the payment is in accordance with similar law from another EU Member State (including educational fees, certain medical expenses and other exceptional payments where complex special needs arise). In addition payments for foster children 18 or over until the age of 21 or until they complete their full time education who suffer from a disability are also exempted.
- Certain social welfare payments including payments to systematic short term workers i.e. people who do 3 days on and 2 days off work, or who work one week on and one week off.
- The exemption for Income Tax for the categories of income described below was extended to Capital Gains Tax. However, it is a requirement that the aggregate of the person’s income and gains must exceed 50% of their total income and gains in order to be exempted. The relevant categories of income and now gains are as follows:
- Income and Gains derived from the investment of certain compensation payments received by permanently incapacitated individuals or a trust established for the benefit of one or more individuals.
- Income and Gains derived from the investment of payments made to Hepatitis C and HIV victims
- Income and Gains from compensation payments made to thalidomide children and the income derived from the investment of such payments
Relief for the Long Term Unemployed
Tax incentives were introduced to benefit employees and employers. The employee is entitled to two separate allowances, as follows:
| Personal Tax Allowance | Child Tax Allowance | |
| € | € | |
| Year 1 | 3,810 | 1,270 for each qualifying child |
| Year 2 | 2,540 | 850 for each qualifying child |
| Year 3 | 1,270 | 425 for each qualifying child |
The definition of a qualifying individual is an individual who have been continuously unemployed for a minimum period of twelve months.
The employer is entitled to a double deduction for qualifying employees in respect of:
- Emoluments paid to those employees in the first 36 months of employment and
- PRSI contributions on those emoluments.
Childminding relief
Childminding relief is, available where an individual minds up to three children (excluding their own children) in their own home. No tax will be payable on the childminding earnings received, provided the amount is not more than €15,000 per annum. If the childminding income exceeds this, the total amount will be taxable as normal under self-assessment. Minimum PRSI contribution of €253 per annum is payable.
Mortgage Interest Relief
Interest relief can be claimed in respect of loans for the purchase, repair or improvement of a taxpayer’s main residence. Mortgage interest relief is allowed at source by the lending institution, the relief is granted by reducing monthly repayments, or by directly crediting the individuals account.
The relief available for 2010 and 2011 is outlined in the table below
| Individual Status | First Time Buyers | All Others |
| Single | €10,000 | €3,000 |
| Married | €20,000 | €6,000 |
First Time Buyers
The relief for first time buyers is 25% for the first 2 years of the mortgage, 22.5% in years 3-5 and 20% in years 6-7. This is set out in the table below.
| Year | Rate | Max Relief – Single | Max Relief – Married |
| Years 1-2 | 25% of interest paid* | €2,500 | €5,000 |
| Years 3-5 | 22.5% of interest paid | €2,250 | €4,500 |
| Years 6-7 | 20% of interest paid | €2,000 | €4,000 |
*Relief is based on the lower of x% of interest paid, or the maximum relief as outlined above.
The seven year time limit for first time buyers applies for seven years starting with the year in which mortgage interest relief is first claimed i.e. to qualify for relief in the tax year 2011 the mortgage must be taken out no later than 1 January 2005.
Tax Tip: if you are a first time buyer buy your home early in the tax year to maximise your credits.
NON First Time Buyers
For non first time buyers the relief is set at 15% for 2010 and 2011 and 10% for 2012.
For loans taken out up to 2011 a credit will be available up to a maximum of €900 per annum for a married couple and €450 per annum for a single person. For loans taken out in 2012 the relief will be reduced to €600 for a married couple and €300 for a single person.
| Year | Rate | Max Relief – Single | Max Relief – Married |
| 2010 | 15% of interest paid | €450 | €900 |
| 2011 | 15% of interest paid | €450 | €900 |
| 2012 | 10% of interest paid | €300 | €600 |
2010: Qualifying loans taken out before 1 July 2011 will qualify for relief for 7 years. Transitional measures will apply for loans taken out between 1 July 2011 and the end of 2012.2011: Loans taken out from 1 January 2004 to 31 December 2011, subject to qualifying loan criteria, qualify for Mortgage interest relief until 31 December 2017 for first time buyers who are in Year 8 of their mortgage, relief will be available at 20% up to a maximum of €2,000 (€4,000 married couple).
Mortgage interest relief on loans taken out after 1 January 2013 has been abolished. Relief for loans taken out up to 31 December 2010 terminates on 31 December 2017.
Rented Residential Property
Mortgage interest relief for rented residential properties has been curtailed to 75% from 1 May 2009. This measure applies to new and existing mortgages.
Energy Efficient Investment
Investment in works carried out to improve the energy efficiency of a residential property will qualify for tax relief. The investment must be in owner occupied properties and is for expenditure net of grants. The maximum spend qualifying for relief is €10,000 for a single person and €15,000 for a married couple, relief is calculated at 20% i.e. €2,000 single and €3,000 for a married couple. The relief will be provided by way of repayment in the tax year following the year in which the expenditure was incurred. The relief is subject to Ministerial order.
Home Carer’s Credit
A credit of €810 ( €900 in 2010) is available for married couples jointly assessed, where only one spouse is working and the other cares for children (with an entitlement to social welfare child benefit), individuals over the age of 65, or incapacitated individuals in their home. Where the carer’s income exceeds €6,700 no credit will be available, where the carer’s credit exceeds €5,080 in a year, the tax credit is reduced by one half of the amount of the excess over €5,080 (subject to a maximum of €810).
The credit is not available to married couples that are taxed as single persons. Neither is the tax credit available to married couples with a combined income of €41,800 and who claimed the increased standard rate tax band for dual income couples.
Carer’s Allowance
An individual can claim an allowance where he/she has to employ a person to take care of an incapacitated family member. The carer may be employed on an individual basis, or through an employment agency. The maximum allowance is €50,000 per annum for each incapacitated individual. The allowance is available at the marginal rate of tax. The allowance will be granted in the first year that the individual becomes incapacitated.
Covenants
Tax relief on medical insurance premiums is granted at source and is given as a direct reduction in premiums. Relief is based on a standard rate (20%) deduction, and is granted on a current year basis.
There is an increased age related credit available for individuals over the age of 60 for new or renewed contracts entered into on or after 1 January 2010 as follows:
| Age of Insured | Age related Credit for 2011 | Age related Credit for 2010 |
| >=50 but <60 | €200 | €200 |
| >= 60 but < 70 | €625 | €525 |
| >=70 but <80 | €1,275 | €975 |
| >80 | €1,725 | €1,250 |
Medical Insurance
Tax relief at the standard rate (20%) is available in respect of dental insurance premiums taken out for non-routine dental treatment.
Dental Insurance
Tax relief at the standard rate (20%) is available in respect of dental insurance premiums taken out for non-routine dental treatment.
Medical Expenses
Un-reimbursed medical expenses incurred on behalf of a taxpayer and his family including “dependants”, may be set-off against income tax liability. Medical expenses include:
- Doctor/hospital care and prescription medicines
- Payments to Revenue approved nursing homes for dependants
- Physiotherapy
- Non-routine dental and opthalmic expenses
- Routine maternity care including Caesarean sections
- Qualifying medical expenses incurred on behalf of a dependent relative (which includes any individual over the age of 65 or permanently incapacitated individuals whether they are relatives or not).
Relief is granted by way of a tax credit at the standard rate of tax, except in the case of nursing home expenses which will be granted by way of an allowance at the taxpayers’ marginal rate of tax. A form MED2 should be completed in respect of non-routine dental expenses (this can be obtained from the dentist).
There is an exclusion for certain “non essential” cosmetic surgery from qualifying for relief. Cosmetic surgery qualifies for relief where it is provided for a physical deformity arising as a result of a congenital abnormality, a personal injury, or a disfiguring disease.
Relief for hospital stays are restricted to expenses necessarily incurred in connection with the services of a medical practitioner, or to diagnostic procedures carried out on advice of a medical practitioner.
Relief for Nursing Home fees qualify for relief provided the nursing home concerned provides qualifying nursing care on site on a 24 hour per day basis. Private contributions towards the fair deal scheme for nursing homes qualify for relief.
Permanent Health Insurance
Premiums paid under approved permanent health insurance (PHI) schemes are tax deductible. The deduction cannot exceed 10% of the individual’s total income. Relief is granted as a deduction against total income and is effectively relieved at the marginal rate of tax. Any benefits received are taxable and therefore subject to PAYE.
Trade Union Subscriptions
Tax relief for Trade Union subscriptions has been abolished with effect from 1 January 2011 (tax credit €70 was available in 2010).
Third Level College Fees
Tax relief is available at the standard rate for the cost of fees paid for approved courses in approved colleges. In addition to full time courses it includes fees paid for part-time courses on behalf of students who do not have a third level qualification. The relief also applies to post graduate fees paid for third level education in private and public funded third level colleges in non-EU Member States. Tax relief for undergraduate fees is also allowable for accredited private third level colleges in EU Member States.
Tax relief is available for repeat years, on individuals taking more than one course and for individuals already holding a third level qualification. Courses such as medicine, dentistry, veterinary medicine and teacher training which were previously excluded from the relief are now included.
The current third level Student Services Charge of €1,500 is being replaced with a new Student Contribution Charge of €2,000.
The first €2,000 of fees for full time courses and €1,000 of fees for part time courses will be disallowed for 2011. The maximum relief available is €5,000 for the academic years 2009/2010 and 2010/2011. Where families have two or more children in third level education on a full time basis and where both are liable to the Student Contribution Charge, tax relief at 20% will be available on the aggregate paid above 2,000.
Training Course Fees
Relief is available for fees between €317 and €1,270 paid in respect of Information Technology and Foreign Language courses, which are approved by FAS. These courses must at least 2 years duration and must not be a postgraduate course. This relief no longer applies to payments made on behalf of dependents.
Service Charges
Credit is available for service charges paid up to a maximum limit of €400 per annum, i.e. value $80. The relief is given by way of credit at the standard rate of income tax, where Local Authority service charges are paid in full and on time, by the person liable for them, or by another person who resides on the premises to which the service charge relates. The relief is available in respect of charges paid for the preceding calendar year, on production of a receipt from the local authority.
Rent-a-Room Scheme
Where a room in a persons’ principle private residence is let as residential accommodation and the gross annual rental income is less than €10,000 per annum this rental income is exempt from tax. Where it exceeds €10,000 the rent is taxable in full.
Qualifying room rentals will not affect entitlements to claim mortgage interest relief. It will also not effect CGT relief on Principle Private Residence on the disposal of the dwelling, and will not lead to a stamp duty claw-back. The relief will not apply where the letting is between connected parties and rent relief is being claimed.
Tip: Consider keeping rental income below the €10,000 threshold.
Rent Relief for Private Accommodation
Rent paid in a tax year for private residential accommodation will qualify for tax relief in that year. The relief will be granted by way of a tax credit at the standard rate of income tax i.e. 20% subject to certain limits. The credit is worth a maximum of €640 (€800 – 2010) per annum to single/widowed persons and €1,280 (€1,600 in 2010) to married/widowed persons who are aged 55 or over. The credit is worth €320 (€400 in 2010) to a single person and €640 (€800 in 2010) to a married couple under the age of 55.
The maximum available is as follows:
55 or Over Others
2011 2011
€ €
Single 3,200 1,600
Married/Widowed 6,400 3,200
The credit does not cover rent paid to certain public authorities or rent in respect of a letting for a period of 50 years or more.
The relief is to be phased out over a seven year period for tenants who on the 7th December 2010 were paying qualifying rent under a qualifying tenancy. The relief is due to be withdrawn in full for the tax year 2018 onwards. New tenants are precluded from claiming the relief from 7 December 2010.
Donations
Relief is available to individuals and companies in respect of donations to approved Charities/Educational Establishments (minimum €250). These include
- certain disadvantaged schools and donations to the state.
- charities, both domestic and third world
- first and second level schools and third level institutions both domestic and International
- donations to an approved sporting body used to fund expenditure on an approved project
There is a restriction on the amount of tax relief available to an individual, this caps the amount of the contribution at 10% of the individuals total income for the year of assessment.
Gifts may comprise of public quoted shares and securities.
A tax credit may be available for a gift of a heritage item to an approved body. The relief is restricted to 80% of the market value of the heritage item. The relief includes property which has been approved by the Minister for the Environment Heritage and Local government. The maximum credit available is capped at €6m in any one year with a minimum donation of €150,000 (or where there is a collection a single item of €50,000).
High Earners
Certain tax breaks available to high income earners are restricted with a tapering restriction applying to individuals with income in excess of €125,000 to ensure a minimum effective tax rate of 30% (previously €250,000 to ensure an effective minimum tax payment of 20%).
Taxable income is calculated by restricting qualifying deductions to 20% of the taxable amount.
If the individuals’ income is less than €125,000 or if the reliefs claimed are less than €80,000 the restriction will not apply.
There is a full restriction on income in excess of €400,000 where there is a claim for specified relief in excess of €80,000 the amount that may be claimed is limited to the greater of €80,000 or 20% of the adjusted income.
A tapering relief applies to income between €125,000 and €400,000.
The following items specifically need to be considered:
- Calculation of double taxation relief and top slicing relief is applied before the relief to be claimed.
- Credits for any relief’s or deductions are given before the application of the restriction (but after the carry forward of excess relief’s from prior periods).
The effect of the restriction is to disapply the age limit for income tax.
Artists Exemption
Artist’s exemption is also limited to €40,000 from 2011 owwards, (2010 – €80,000).
