Tax Tips Prior To Year End Part 1
Deciding how much you need to pay The Taxman every year is no fun. Unfortunately, it is a necessary evil. But how can you save a bit of your tax bill this year? Have no fear, Comerford Foley is here!
Home Renovation Incentive – [HRI]
Who says tax deductibles can’t be fun? Have you heard about the home renovation incentive? Have you been dying to get the kitchen redone? What about retiling the bathroom? OR simply just a fresh coat of paint in the house? The HRI has you covered! It even covers buy to let properties, just make sure you have a tenant within 6 months of completing the works.
Where’s the trick you ask? So long as you ensure the contractor you get to do the works is a HRI qualifying contractor then you’re in the clear! That simply means making sure they are registered for VAT and are completely tax compliant. They’ll know how to file all the relevant paperwork . All you need to check is that they submit the payments in the HRI system online. It’s as simple as that!
You can then claim for the HRI tax credit the following tax year.
Here’s the mathsy bit:
This is an incentive that makes it possible to claim the VAT element of renovation work up to €30,000 excluding VAT . The maximum amount claimable is the VAT inclusive price of €34,050 so that vat element of €4,050 can be claimed back over a 2 year period following the year in which the works were carried out and paid for.
For more information check out the Revenue website or contact one of our friendly team!
Rented residential Properties – Residential Tenancies Board [RTB]
Are you lucky enough to be a landlord? Then this section will be of interest to you! Nobody likes paying a mortgage, but what if we told you, that you could get a tax deduction for the interest on your mortgage? Thought that might get your attention! Simply register the tenent with the Residential Tenancies Board and you’re sorted!
For the mathsy bit:
Person B has a buy to let property. They have a mortgage on this of €200,000 with €8000 per year in interest. However they have been renting this property since January 2017 for €1000 per month, so that would generate €12,000 a year. They can deduct 80% of the interest cost, which is €6400, from the income, so they would be left with a taxable profit of €5600 and assuming a tax rate of 51%, their tax liability would be € 2856. If you haven’t registered with the PRTB your tax liability will be €6120 which is over double. That’s a huge difference and a HUGE SAVING!
How does it work though if you’re renting through the government? Then you’ve heard of The Housing Assistance Payment (HAP). This is a form of social housing support for people who have a long-term housing need. Where properties are let to the local authority for social housing for a 3 year period from 1 January 2016 the restricted amount of mortgage interest, 25% for 2016, 20% for 2017 and 15% for 2017 will be deemed to have accrued on the day after the final day of the 3 year period and should be deductible in year 4.
Employment Investment Incentive Scheme [EIIS]
I know I’ve been bamboozled with the adverts in the papers about the EIIS. This is a scheme that works best for early stage companies that are currently growing but are wishing to raise funds from their investors for expansion. It benefits the investor in that they can claim tax relief at a higher rate. The relief is given in two stages.
Now for the mathsy bit:
If you invest €20,000 in shares in a qualifying EIIS company before the end of 2017, you can claim tax relief on 75% of that in 2017. Therefore you get tax relief on €15000 in 2017 and, assuming the top tax rate of 40%, it results in a €6000 tax saving. The remaining 25% can be claimed four years after the initial investment, so 2021. Fairly straightforward right?
To get the additional 25% tax relief, the only catch is that the company you invest in has to meet certain conditions with regards employee numbers and wages or Research and Development, but in a growing company, that shouldn’t be an issue! At the end of the four years, the plan would be for the company to buy back your shares for an agreed price. Don’t forget about Capital Gains Tax though!
Capital Gains Tax Losses – Shares and Property
The current rate of Capital Gains Tax is 33%? So the minister gets a 1/3 of any gain you make without taking any of the risk!
To put it simply, you have invested €100. At the end of the year, that is now worth €150. You are now liable to pay CGT on that €50 at 33%, so €16 goes into the Ministers back pocket. That same year you invest €200 in another venture. At the end of the year, that is now worth €150. So you’ve made a loss of €50 on that investment. You can use your loss and offset it against the gain, so you don’t have to pay any CGT in this example.
When you get into investments in the thousands, this offsetting can save you more money than you realise!
Another good thing is that you can carry these losses over to the following tax year. You can’t go back though, except in the case of the death of the holder of the investment.
That’s all for this week! Check back next week for Part 2 of our tax tips. While you’re waiting, don’t forget you can get further information on any of the above tax advantages simply by contacting us. Or if you would like to discuss your tax return, make sure to get in contact. Get in touch. We love to hear from you!