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Money Times - 16/09/09

Posted by Jill Kerby on September 16 2009 @ 23:12

IS TIME RUNNING OUT FOR TAX RELIEF?

 

No one yet knows – and that includes the Cabinet – which of the Commission on Taxation’s 200 plus recommended tax changes will be endorsed or adopted in the December (and subsequent) budgets.

 

It’s beginning to look like the controversial – and frankly unworkable – property tax will be long-fingered, but the carbon tax, water charges, downward adjustment to child benefit and some adjustment to pension tax relief are likely to be introduced, (along with a myriad of smaller disjointed reliefs and allowances that simply accumulated, piece meal over the years.  

 

The reality is that with over 400,000 people unemployed (and growing), any tax increases that are not offset with sharp income tax reductions, including the abolishment of the income and health levies – is impossible. Very simply, this report is five years too late and cannot be implemented until the €20 billion budget deficit is tackled and unemployment figures reversed. 

 

With no one holding out any great hope that sufficient expenditure will be cut out to stop the rot, over the next couple of weeks, I’m going to look at a few practical ways to try and get around the inevitable assault on your income and savings, specifically how to reduce your carbon tax liabilities and how to minimise the possible assault on retirement savings and income if you earn at the higher, marginal rate of tax or are a pensioner.  This is important because of the looming October 31st preliminary tax deadline for those who top up their retirement contributions. 

 

But first it’s important to remind readers – again – of the importance of doing a careful review of your existing income and expenditure and to take advantage now of any tax breaks that still exist and that may be abolished or reduced in the next Budget: 

 

Medical and dental expenses not covered by private health insurance.  You can claim up to four years in arrears for these expenses. The refund is based on the 20% standard rate tax (it had been available at the 41% rate) but the individual and family ‘excess’ – the amount you had to pay first – has been abolished. If over the last four years you spend, say, €1,000 on qualifying medical and dental treatments, you will be entitled to a €250 refund after filling out a Med 1 and Dental 1 form and submitting it to the Revenue Commissioners. 

Rent allowances should be claimed by anyone renting in the private sector as this is one property-related tax relief that the government may decide to scrap, even if they don’t introduced a property tax because of how rents are falling. Worth up to €400/€800 a year for individuals or married couples and twice this for over 55s, this relief could be the equivalent of a month’s rent. 

Service charges, union membership subscriptions, uniform allowances for certain workers like health professionals should be claimed as these have also attracted the attention of the Commission which has recommended they be abolished.  The amount that can be claimed is relatively small – just €80 in the case of the bin charge -– it’s definitely worth claiming if you haven’t done so for three or four years. 

To make any of these claims, contact your local Revenue Commissioners office or go online at www.revenue.ie . Click on the link to ‘Personal Tax’ where you will then see the links to medical expenses relief, rent relief and mortgage interest relief (though this and private health insurance relief is now applied at source). It also lets you apply for a PAYE balancing statement review if you think you may have overpaid your tax.  This is an important review for anyone who has been made redundant and is probably entitled to a PAYE/PRSI tax refund. 

Another relief that the Commission recommends being abolished is the Rent-a-Room relief, worth €10,000 tax-free per year.  Many first time buyers and older people avail of this scheme and financial advisors suggest that anyone who has been thinking about it, might want to move quickly and join it before the Budget:  the scheme may be abolished, but chances are existing landlords and tenants will be able to see through their tenancy.

 

 Retirement Relief

 

The higher rate retirement contribution relief of 41% plus 6% PRSI contributions is a political hot potato:  it’s being described as a fat cat perk, when in fact the vast majority of recipients earn between €36,000 and €70,000 a year.  However, this might be the last year of full relief, so take advantage of it if you are still in a position to make contributions. (I will be writing a full column on what to do about your pension in the next fortnight.)

Meanwhile, the Commission also recommended that tax relief on private insurance policies should be reduced from the existing 20% relief (at source). This won’t be very good news for individuals and families already desperately worried about being able to afford their private cover. 

You should certainly be shopping around for best value motor and home insurance - www.123.ie and www.chill.ie  are a good place to check out quotes on-line – but there are also now specialist fee-based health insurance brokers – see www.insurancesavings.ie - who can help you shop around for an affordable health insurance contract. 

 

VHI, the largest of the three private insurers has made a number of changes and adjustments to mainly its range of popular Plan B’s – not all of them for the better.  New family plans have been introduced and child rates have fallen, but some families may have switched too soon, or into the wrong plans to get the full benefit, says health insurance advisor Dermot Goode. They have also introduced a new product that is limiting how much they pay certain treatments like hip and other joint surgery and eye surgery, including for cataracts to just 35% of the cost. The 65% balance must be paid by the member.  

 

The concern of health plan advisors is that VHI members or others, especially older ones, will switch into this plan because it is cheaper but not realise the implications if they make a claim.

 

Next week:  the cost of your carbon footprint and water useage.

 

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