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Tuesday, 02 December 2014 11:42

A GUIDE TO TAX AND ENTITLEMENTS IN 2015 part 1 of 5

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TAXATION

taxThis is part 1 of a 5 part series

Part 2             

Part 3              

Part 4             

Part 5              

All 5 parts here

Under the Tax Credit system, Tax Payable = Gross Tax minus Tax Credits.
Gross tax liability is calculated on your total income (after deduction of superannuation and permanent health benefit) by applying 20% to income up to your standard rate cut-off point and 40% on the remainder. The cut-off point in 2015 will be:

 

Standard Rate Cut-off Income 2015

 

Weekly

12 Month Value

Single/Widowed

€650.00

€33,800

Single Person Child Carer

€726.92

€37,800

Married (one income)

€823.08

€42,800

Married (two incomes)

€1,300.00

€67,600

If you rent rooms in your own home for less than €12,000 gross, this will be exempt from income tax and USC, provided the tenant is not your own child, and the rent is not being paid by the employer of the tenant.

If you care for up to 3 children in your home and receive less than €15,000, this income will be exempt from tax but a minimum €500 Social Insurance is payable. If you exceed these amounts, the exemption is lost and the whole lot is taxed. You must be registered with the HSE as a child minder.

Your Tax Certificate will show the annual value of all your Tax Credits and the equivalent weekly or monthly amount which are subtracted from this gross liability to yield the tax payable:

Tax Credits 2015

 

Single Person

€1,650

Married Couple

€3,300

Widowed

€2,190

Single Person Child Carer

€1,650

PAYE Credit (per individual)

€1,650

Age Tax Credit (per individual)

€245

Incapacitated Child

€3,300

Home Carer’s Tax Credit

€810

Dependent Relative

€70

 

  • The Home Carer’s Tax Credit is available to a spouse in a one-earner family who is caring in the home for a child who is eligible for Child Benefit or for an aged or disabled person. You must apply for this allowance. The home is allowed to have up to €5,080 income of their own, thereafter the credit is reduced, reaching zero if income exceeds €6,700. Carer’s Allowance is not counted as income in this means test, nor is income from child-minding under €15,000.
  • Single Person Child Carer Credit applies to a single or widowed person if you are the principal carer of a child aged under 18, over 18 in full-time education, or permanently incapacitated.
  • Dependent Relative Credit is claimable if you support a widowed mother or incapacitated relative whose income does not exceed the contributory OAP.
  • A parent with dependent children who is widowed gets an additional tax credit in each of the 5 subsequent tax years of €3,600, €3,150, €2,700, €2,250 and €1,800 respectively.

Tax credits which are unused are not refundable. They will be carried forward from week to week during a tax year, but if unused after the end of the tax year, they are lost.

Age Exemption: Persons aged 65 or over are exempt from income tax if their gross incomes from all sources is under €18,000 (single), €36,000 (married).

An Incapacitated Person, or one or more of their family, can deduct up to €50,000 from their taxable income to employ a home help.

Mortgage Interest: Mortgage relief does not apply to new loans taken out after 31 December 2012.

Certain expenses carry a 20% Tax Credit:

  • Water Charges up to a max €500.
  • All unreimbursed Medical Expenses (excluding Nursing Home expenses which are allowed at your marginal rate); Maternity care; a Psychological Assessment and Speech Therapy for children. You can also claim for the medical expenses of a close relative or any incapacitated or elderly person regardless of their means. Routine Dental or Optical Care don’t qualify.
  • Health Insurance This relief is now granted at source and deducted from your premium by the insurer. Relief is confined to the first €1,000 per adult, €500 per child on renewals.
  • Insurance to cover long-term care costs in the event of serious disability, and to cover non-routine dental costs.
  • College Fees (including Tuition Fee and Student Contribution) of up to €7,000 for each student for full or part-time undergraduate or postgraduate courses in accredited courses in Ireland. However, the first €3,000 of each claim in 2015 is disregarded (i.e. for parents paying only the Student Contribution of €3,000, relief only applies for the second and subsequent child in college).
  • Course Fees between €315 and €1,270 per course for foreign language or ICT courses (approved by SOLAS).
  • Rent Payments by tenants to private landlords is being phased out. Only tenants renting before 7 December 2010 still qualify. For them relief in 2015 is up to a maximum €600 (single), €1,200 (married/widowed), and if you are aged 55 or over up to €1,200 and €2,400 respectively. This is to be phased out by 2018.

Employer provided childcare is subject to income tax as Benefit in Kind.

A Universal Social Charge applies to gross income from whatever source (excluding only Social Welfare Payments) and without deduction of pension contributions

  • 1.5% up to €12,012 (€231 per week)
  • 3.5% on the next €5,563 (next €107 per week)
  • 7% on the next €52,468 (€1009 per week)
  • 8% on the remainder

An exemption applies to persons whose total income is under €12,012 (€231 per week). The self-employed pay 11% on income over €100,000. Persons aged 70 or over and Medical Card holders whose aggregate income does not exceed €60,000 pay a maximum 3.5%.

Pay Related Social Insurance (PRSI) applies to gross income (with no deduction for pension contributions) of workers and the self-employed aged 16-66. A single rate of 4% now applies to both categories with no ceiling. Public servants on modified rate will now pay 4% on their income in excess of €75,036. All workers are exempt from Social Insurance if they earn less than €352 per week. The minimum contribution by a self-employed person is €500 per year. From 2014 PRSI applies to unearned income of persons who are required to make a tax return. Insignificant income (e.g. bank interest) of a PAYE payer is not affected.

Pensions: A certain portion of gross earnings under €115,000 can be put into a pension tax free. It is up to 15% (under 30 years) rising in steps to 40% (60 years or over), allowable at your top rate of tax. However, a ceiling of €2 million applies to the total value of a person’s pension plan. Any benefit that accrues over that value will have a 41% retention charge, before ordinary tax is applied to the balance. In 2014 and 2015 a person may withdraw 30% of AVCs, but you will be taxed at your marginal rate of tax. The levy on private pension funds is being reduced from 0.75% to 0.15% in 2015 and eliminated thereafter.

DIRT Tax: A single retention tax of 41% applies to interest earned on ordinary deposit accounts, investment accounts and all Credit Union accounts. Persons who are 65 and over, or permanently incapacitated, can, if your total income is not sufficient to make you taxable, notify your bank and receive the interest without deduction of DIRT. From 14 Oct 2014 until end 2017, First Time Buyers can get a refund of DIRT on savings to make up a deposit of up to 20% on the purchase of a home.

Local Property Tax is chargeable on the owner of a residential property at a rate of 0.18% of the market value on 1 May 2013 as fairly assessed by that owner (a higher 0.25% applies to the excess over €1million). This valuation will not change before 1st November 2016. For 2015 the Dublin Councils have agreed to reduce the tax due under this calculation by 15%.

Exemptions include:

  • New houses purchased up to October 2016 will be exempt until the end of 2016.
  • Houses vacant, where the occupant can no longer live alone due to long-term infirmity.

Inability to pay:

An owner may defer the entire payment:

  • For an indefinite period where gross income does not exceed €15,000 (single) or €25,000 (couple).
  • Up to 2017 where gross incomes less 80% mortgage interest falls below €15,000 (single) or €25,000 (couple) and may defer half the payment under these tests up to €25,000 (single), €35,000 (couple). Interest of 4% of the deferred tax will be added each year to be recovered from the sale/transfer of the property.

Home Renovation Incentive:

An income tax credit of 13.5% applies to home renovations up to a maximum expenditure of €30,000 undertaken before 31 December 2015 and will be refunded over the two years following the year in which the works are carried out. To qualify at least €5,000 (inclusive of VAT) must be spent. Both home owners and landlords can avail of this credit. The tax credit is only available where Local Property Tax and Household Charge are up to date. If planning permission is required, you have up to March 2016 to complete the works.

 

 

Read 42677 times Last modified on Wednesday, 03 December 2014 21:47
Robert Tallent

Bob is a Management Consultant, Mentor and Trainer. He is also an Entrepreneur from 1983 to the present day. Between 1983 and 1995 he ran four businesses with a turnover in excess of £1m. As well as having an Honours Degree in Business Studies, he is also an Industrial Engineer and managed a large department in a multinational with large budgets and responsibilities.

He studied to become a Management Consultant, Mentor and Trainer and setup The Synergy Group in 1995.

He has a huge range of business and management experience in practically every industry.

Call him privately on +353(0)87 232 6927

or email him on bob@synergy.ie

Main land line is +353(1) 821 5189

Website: www.synergy.ie
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