Complementing this is for you yourself to invest a bit of time into learning the tax system and becoming aware of the various schemes out there to help you learn the tax system.
This article looks initially at the most obvious people who will help reduce your tax liability.
It’s not your employer, it’s not your bank manager and it’s not your local politician! It’s much closer to home than that. It’s your family!
Here are ten tips to help you maximise tax breaks which relate to your family.
1. PAYE – Joint Assessment (Married couple)
Review the tax you are paying either from your payslips or the P60 you get at the end of each year.
Check to see your maximising both the tax credits you get and the standard rate cut offs. Invariably a married couple pay less tax through joint assessment rather than single assessment.
2. Sole Traders – employ your family.
A salary paid to a spouse in this case is not liable to PRSI. Also your total income tax bill is reduced by using the married couple’s tax band. If he/she is not working you would not be able to avail of the full allowance.
Also, a family member who works part time in your business can be paid up to €348 per week without incurring PAYE or PRSI – so long as they have no other income. This obviously cuts down your income tax bill as well as their wages are treated as a taxable expense within your tax computations.
3. Capital Gains on shares.
Shares can be transferred free of capital gains and stamp duty between spouses so as to double the annual tax exemption of €1,270.
4. Capital Acquisitions Tax (CAT).
Gifts or inheritances to your family members are liable to CAT of 20%.
Thresholds change per year but in 2011 the lifetime limits are as follows :
– son/daughter – €414,799
– Parent/brother/sister/niece/nephew/grandchild the limit was €44,181
– Other relationships have a limit of €20,740.
By carefully maximising these limits, gifts and inheritance tax can be minimised.
5. Make a Will
An example of the tax implications of not doing so can be seen by reading number 4 above again !
6. Transfer a house/site to a child.
In certain cases a house/site can be transferred from a parent to a child without the child incurring CAT.
But the child must occupy the house as their principal private residence and in the case of a site must build their principal private residence on the site.
7. Favourite Nephew / Niece.
In situations where you have no children but would like to pass on a gift/inheritance to a favourite nephew or niece, one can subject to conditions avail of the son/daughter limits outlined in 5 above to minimise Capital Acquisitions Tax.
8. Home Carers
This credit may be due if, as a married couple, you are jointly assessed for tax and you or your spouse, as a Home Carer provide care for
· A child for whom you are entitled to social welfare child benefit.
· A person who is permanently incapacitated.
· A person aged 65 or over.
The extra tax credit is at €900 but reduces base on the Home Carers income (if any).
9. Maternity Benefit is tax Free.
If you were in employment when you took maternity leave and received maternity benefit, this should have been paid to you tax free.
Some employers elect to pay the statutory maternity benefit as part of your salary, and have you return any cheques you get from Social Welfare to them directly. This simplifies things BUT you should not have paid any tax on this benefit.
10 Marry an accountant !
Of course the greatest way of reducing your tax liability is to have a good accountant. If there’s none in the family then look at getting one !
They’re not that boring once you get to know them !!