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Still have some money left after the budget?

Irish News of the World

Sunday, April 12th, 2009

Diarmuid MacShane

Still have money left after the budget?

The Budget

Winning the Lotto is about the only way left to make money in Ireland without the Government taking a huge chunk out of it. That and being lucky enough to have picked Mon Mome to win the Grand National at 100/1 last Saturday.

For many of us it’s going to be very worrying when we sit down to check out the full impact of this weeks disastrous budget on our personal finances. Depending on our circumstances, we’ll be worse off by between €600 and €6000 per year.

Silver Lining

Was there anything in the budget documents that that could give us even a glimmer of hope for the coming years?

The shocking answer is that there is nothing, nada, zilch. The best that can be said about Tuesdays budget is that it could have been worse, for now. But it will be getting worse in 2010 and 2011 based on what the Minister had to say.

Can we do anything?

There are still ways where we can keep our tax payments down, or where we can get money back from the government. Depending on the money you spend during a normal year, you could potentially get back much of the extra tax charges – if you’re not claiming tax refunds already. Many of these should be familiar to you, but if not, these are definitely worth checking out.

Medical Expenses
You can claim tax relief on certain medical and dental expenses at the standard rate of tax of 20%. You can claim relief on expenses you pay for yourself and for others. If you were to pay €1000 in medical expenses during 2009, you can reclaim €200 of that in early 2010. Check the Revenue.ie website to see what medical and dental procedures are included an allowable for tax relief.

Mortgage Interest Relief

Minister Lenihan removed all mortgage interest relief for anyone who’s owned their home for 7 years or more. But, if you’re a new first time buyer, or bought your house in the last 4 years, you can claim back 25% of the mortgage interest you pay up to a maximum of €10000 per year for 4 years. The tax relief rates decline then in years 4 to 7. If you’re a non-first time buyer, you can still claim relief of 15% until year 7 of your mortgage.

For first time buyers, for a single person, this tax relief is still worth €208 per month, or €416 for a couple. Remember, you get this relief directly through your mortgage provider when you submit a TR1 form.

Service Charges

If you’re paying service charges, primarily bin charges, or water or sewage charges, you’re entitled to get tax relief on those payments also. It normally doesn’t amount to that much, but still, it’s your money. The tax relief is provided at the standard 20% rate. For example, if you pay €240 per year in bin charges, you will get tax relief of €48. There is a limit of €400 of expenditure per year for which you can reclaim tax – so up to €80 in a year.

If you live in an apartment, you can still reclaim tax on the portion of your management charge that relates to bin charges. If you don’t know how much that is, you’re management company will be able to tell you.

Rent Relief

If you’re living in rented accommodation, you can claim tax relief on your rent paid. You must be paying rent for private rented accommodation (not local authority or state housing) which is used as your sole or main residence.

Tax relief is available at the standard rate of 20% so the maximum relief you can get for 2009 as a single person is €400 back on your total rent paid – or €800 for a couple.

Other Reliefs

You can also claim tax relief for third level fees paid if you’re doing certain courses in a third level institution.

If you’re a union member, you can also claim tax relief on your annual membership fees.

DIRT Tax

DIRT is a tax on the interest you earn on your savings. And Minister Lenihan has even come after us to take a share of that money, increasing the tax from 23% to 25%.

If you’re a pensioner that isn’t liable for income tax, you should check to make sure that you’re not paying any DIRT tax your savings interest up to the thresholds of €20,000 for a single person and €40,000 for married couples.

If you have paid DIRT tax that you shouldn’t have, it’s easy to claim it back. Forms are available at any financial institution or tax office, but you’ll also need proof from your account to show that you did pay the tax in the first place.

There are some interest free savings from An Post such as savings certificates, savings bonds and prize bonds where you don’t pay any DIRT at all. The only problem with these is that they are longer term savings where your money will be locked away.

Money in your pocket

Despite all the bad news this week, there are ways I’ve shared with you here where you could get back a significant amount of money back from the Government. This could amount to up to €3000 for a single person or     €6000 for a couple.

Getting all the tax relief you’re entitled to could mean that the harsh budget from last week won’t have much of an impact on you at all.

3 comments On Still have some money left after the budget?

  • Claim them while you can. Lenihan will look for ways to boost revenue.
    – He has already indicated that Mortgage Interest relief will be completely scrapped in the near future.
    – I would expect he will scrap Medical and education expenses relief by claiming the public systems should suffice.
    – He will scrap the rent relief more than likely at the same time as the Mortgage interest relief as he will claim the two are linked.
    – Service charges relief will be scrapped and I suspect they will claim scrapping it is an incentive to engourage people to recycle more and reduce their refuse bill.
    – Dirt Tax will be charged at your upper tax rate (e.g. if you earn enough to pay the higher rate of tax your dirt will be at the higher rate of tax).

    As unemployment heads towards 16% and 600,000 by the end of next year we will reach the point where we live in a soviet like society where the unemployed and employed alike live similar lifestyles because the employed are so heavily taxed there is no financial incentive to work and the only reason to do so is to have something to make you get out of bed in the moening

  • @Colm – unfortunately for many of these topics, I guess you’re probably right.

    Some of the items are fair enough, others not so much.

    As you point out, soon there’ll be no point working and putting the effort in if you’re going to be in a similar position financially by not working.

    The Laffer Theorem I believe this potential scenario is caused. Warning – Wikipedia link to follow, but you’ll get the gist –
    http://en.wikipedia.org/wiki/Laffer_curve

  • Come the next budget wait until he talks about tax increases and national recovery and announce “he’s having a laff….er” and see how many of your friends realise what you mean. Might be the one bit of fun we get to have in the next 18 months.

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