Taxes are one of the biggest expenses you’ll encounter in life, so finding ways to reduce your tax burden can significantly impact your financial future. Every euro saved on taxes is money you can put toward your goals, allowing you to retain more of your income and plan effectively for the future.
With the Irish tax return deadline approaching on October 31st, Nick Charalambous, Financial Advisor and Managing Director of Alpha Wealth, shares four practical strategies to help you protect your income and keep more of your hard-earned money in 2024.
1. Pensions
Maximising your pension contributions is a highly effective way to reduce your tax liability and save for the long term. By contributing, you secure your future while benefiting from up to 40% tax relief, depending on your income (reduced to 20% if you earn less than €42,000 per year). For example, a €10,000 contribution could yield up to €4,000 in tax savings, amounting to a 66% gain. Additionally, pension savings grow tax-free, and a portion can be withdrawn tax-free as early as age 50. If your employer offers a matching scheme, it’s essentially free money, making it crucial to maximise these contributions for retirement.
2. Employment & Investment Incentive Scheme (EIIS)
The Employment Investment Incentive Scheme (EIIS) is another powerful tool for reducing your tax bill. This government-backed scheme lets you invest in qualifying Irish companies and receive tax relief on earned and non-earned income, such as dividends and rental income. For example, investing €6,500 could yield €3,500 in tax relief the following year, doubling your investment. Plus, there’s potential for additional gains if the company performs well.
3. Utilise Gift Allowances for Your Children
Using gift allowances is a smart way to reduce future tax liabilities for your family. The Capital Acquisitions Tax (CAT) provides a tax-free threshold, but you can maximise this by gifting smaller amounts annually. The first €3,000 gift per person per year is exempt from CAT, allowing you to give tax-free gifts to children or grandchildren from multiple family members. Over time, these gifts can cover significant expenses like education or a house deposit without incurring tax penalties.
4. Claim Expenses
Many people overlook tax-saving opportunities available through claiming expenses. Using the Revenue Online System (ROS), you can easily reclaim expenses like medical costs, rent relief, and work-from-home expenses. ROS lets you claim for up to four previous years, potentially recovering a significant amount. This simple process helps reduce your tax liability and ensures you’re not overpaying.
Book a financial review with Alpha Wealth at www.alphawealth.ie for trusted financial advice on tax savings, pensions, investments, and more.
