What are tax credits?
Tax credits can reduce the tax you pay in a year.
They are different from tax reliefs, which reduce the income you must pay tax on. However, they are both similar in lowering your overall tax bill.
Everyone receives personal tax credits. There are personal tax credits for:
- Single people
- Married people or those in a civil partnership
- People who are widowed or are surviving civil partners
However, depending on your circumstances, you may be entitled to other tax credits.
How do tax credits work?
The amount of tax you have to pay is based on a percentage of your income. However, your tax credits are deducted from the amount of tax you have to pay.
For example, if you earn €24,000 a year and are charged tax at 20%, you would owe €4,800 in tax before your tax credits are applied. If you have tax credits worth €2,000, it would reduce the amount of tax you have to pay to €2,800 (€4,800 – €2,000).
Who is entitled to tax credits?
Everyone who pays tax in Ireland will have some tax credits. For example:
- If you are an employee or receiving a pension or social welfare payment such as a Jobseeker’s Benefit, you are entitled to an Employee tax credit of €1,700
- A single person is also entitled to a tax credit of €1,700
This means that if you are a single, employed person earning less than €17,000, your tax credits will be more than the amount of tax you owe, and you will not have to pay any Pay As You Earn (PAYE) tax.
However, you may still need to pay Universal Social Charge (USC) or Pay Related Social Insurance (PRSI). If you have questions about your tax obligations, an accountant can advise you.
What tax credits can you claim?
Besides your personal tax credits, we’ve outlined ten tax credits you may be eligible for. If you’re unsure which tax credits you can claim, an accountant can advise you.
1) Single-person child carer credit
The Single Person Child Carer, or Single Parent tax credit, is available to a single parent or to someone who has custody of and maintains a child who is living with them.
This can include someone who is:
- separated from their spouse,
3) Dependent relative credit
You can claim the Dependent Relative Credit if you care for a relative at your own expense.
To receive this credit, the relative you claim for must:
- Be unable to care for themselves due to incapacity by old age or infirmity,
- Be your or your partner’s parent or child,
- Depends on your services due to old age or infirmity.
Your relative does not need to live in Ireland to qualify for this credit unless you are claiming for your child who is caring for you.
4) Married tax credit
You can qualify for a Married Tax Credit if:
- You and your partner/spouse are jointly assessed,
- You are separated or divorced, and you pay voluntary maintenance to maintain your spouse.
5) Medical expenses
You can claim tax relief on medical expenses using Revenue’s PAYE service.
You can claim tax relief on all general medical expenses, including dental fees, once you have your receipts.
If you will receive payment from your insurance provider, the HSE or receive any other compensation payment, you cannot claim medical expenses.
Usually, you will receive tax relief for medical expenses at your standard tax rate (20%).
6) Third level fees
Tax relief is available for university fees. Relief is available per:
- course and
- academic year
However, relief is not available on administration fees, examination fees or registration fees.
The relief will not cover any fees that a grant, employer or scholarship pays.
7) Widowed parent tax credit
A widowed person with dependent children can claim this tax credit.
You can receive this credit in addition to the Widowed Person Tax Credit.
You can claim this credit for five years after the year of death of a spouse or civil partner.
Only one tax credit is provided, regardless of how many children there are.
You can also qualify for the Single Person Child Carer Credit with this credit.
8) Home carers credit
If one partner in a marriage is a Home Carer, you can claim the Home Carer Tax Credit. The dependent person cannot be your spouse.
You can claim Home Carers Credit if you and your partner are:
- Jointly assessed for tax,
- One of you works in the home caring for the dependent and
- The home carer’s income is under €7,200.
9) Age tax credit
If you are 65 years or older in the tax year, you can claim the Age Tax Credit.
You can also claim the Age Tax Credit for a couple if you and your spouse are over 65.
You will be automatically granted the Age Tax Credit when you turn 65.
10) Nursing home expenses
Income tax relief is available on fees for nursing homes.
If you pay the fees for a nursing home, you can claim the tax relief whether you are in the nursing home or paying for someone else to stay there.
How do I claim tax credits?
Generally, Revenue will only automatically assign basic personal tax credits. However, if you are entitled to any other tax credits mentioned in our guide, you can do so through Revenue’s online My Account system.
If you’re unsure, our accountants can help you identify the tax credits you are eligible for and assist you in refiling or filing your accounts to claim them.
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.