What are tax credits?
Tax credits can reduce the amount of tax you pay in a full tax year.
They are slightly different from tax reliefs which reduce the amount of income you will have to pay tax on. However, they are both similar in that they reduce your overall tax bill.
Everyone receives personal tax credits. There are personal tax credits for:
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 taxed at 20% you would owe €4800 in tax before your tax credits are applied.
However, if you had tax credits worth €2000, it would reduce the amount of tax you had to pay to €2800 (€4800 – €2000)
Who is entitled to tax credits?
Everyone who pays tax in Ireland will have some form of tax credit. For example:
- If you are an employee or receiving a pension or social welfare payment such as Jobseeker’s Benefit you are entitled to an Employee tax credit of €1700
- A single person is also entitled to a tax credit of €1700
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.
Other tax credits you can claim
Besides your personal tax credits, we’ve outlined 10 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,
This credit is €1,650 per year and will reduce the tax you pay by €31.73 per week.
2. Incapacitated child tax credit
You can claim this credit if you have a child who is permanently incapacitated and unable to support themselves.
To claim this credit you will need to complete a Form ICC1.
You will also need to get a certified Form ICC2 from the child’s medical practitioner.
The rate for this credit is €3,300.
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,
- Depend 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.
Unless your dependent relative’s income is over €14,753 you can receive a tax credit of €70.
4. Married tax credit
You can qualify for 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.
The rate of the tax credit for a married person is €3,300.
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 expense, 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 rate of tax (20%).
6. Third level fees
Tax relief is available for university fees. Relief is available per:
- course and
- academic year
But, 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.
Relief comes at the standard rate of income tax (20%).
The maximum fee you can claim is €7,000 per student per course.
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 5 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.
The credits are as follows:
€3,600 in your first year
€3,150 in your second year
€2,700 in your third year
€2,250 in your fourth year
€1,800 in your fifth year
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.
If the home carer’s income is between €7,200 and €9,600 then a reduced tax credit applies.
The Home Carers Credit rate is €1,500.
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 is over 65.
You will be automatically granted the Age Tax Credit in the tax year that you turn 65.
If you are single or widowed, the age credit is €245 per year.
The tax is €490 for a couple if you are in a marriage.
10. Nursing home expenses
Income tax relief is available on fees for nursing homes.
If you are paying the fees for a nursing home, you can claim the tax relief whether you are in the nursing home or you are paying for someone else to stay there.
If the nursing home provides 24-hour on-site nursing care you will receive tax relief for at a rate of 40%.
How do I claim tax credits?
Generally, Revenue will only automatically assign basic personal tax credits. However, if you are entitled to any of the 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.