Expenses that may be deducted from taxable income are those that are incurred wholly, exclusively, and necessarily in the performance of the duties of employment. Expenses incurred travelling to and from work and entertainment expenses are not deductible.
Contributions to revenue-approved occupational pension schemes are allowable deductions for employees. PRSI and USC apply to employee pension contributions. No deduction is available in calculating employer PRSI contributions in respect of pension contributions made by employees.
The annual earnings limit that (along with age-related percentage limits) determines the maximum tax-relievable contributions for pension purposes is EUR 115,000. Where the rules of an Irish Revenue approved pension scheme permit a portion of the pension to be taken as a lump sum, any lump sum in excess of EUR 200,000 will be subject to tax.
Tax relief may be claimed on contributions from remuneration subject to the earnings limit of EUR 115,000. The allowable personal contributions are expressed as a percentage of remuneration and are age related as follows:
|Age attained during tax year||Maximum relief (%)|
|Less than 30||15|
|30 but less than 40||20|
|40 but less than 50||25|
|50 but less than 55||30|
|55 but less than 60||35|
|60 and over||40|
The lifetime limit for tax-relieved pension funds for an individual is EUR 2 million, effective 1 January 2014. The tax-free pension lump sum has been capped since 2011 at EUR 200,000.
Relief for interest on loans for rental investments, trading companies, and partnerships
The principal non-business expenses that may be deducted are interest on loans for investments in rental properties, certain private trading companies, and partnerships subject to certain conditions.
Certain health expenses in relation to nursing home fees can be claimed as a deduction from taxable income at the marginal rate of tax (i.e. currently 40%). Other qualifying health expenses may qualify for tax relief at 20%.
Employment and Investment Incentive (EII) and Seed Capital Scheme (SCS) / Start-Up Relief for Entrepreneurs (SURE)
The EII scheme enables investments in a wider range of companies to qualify for tax relief, to simplify the administration requirements, and to increase the limits in relation to the size of investments that may qualify for the relief. The SCS scheme provides for a refund of tax already paid by a specified individual, when that individual makes a relevant investment in a qualifying company.
The scheme is being rebranded as SURE and being extended to individuals who have been unemployed for up to two years.
The EII and SCS schemes will expire on 31 December 2020.
As of 2 November 2017, the relief has been amended to exclude individuals who are connected with the investee company from claiming the relief. Where the individual or their relative/associate owns any share capital, loan capital, voting rights, or rights to the assets on a winding up within the company, then the individual would be deemed to be connected to the company. Some exclusions are available in relation to the above, such as either where the individual already owns shares that qualified for EIIS relief and the individual or their relative/associate does not exercise control of the company or certain shares that were issued on formation of the company.
Please see Personal exemptions below and the Other tax credits and incentives section.
A personal allowance is available if an individual employs a person to take care of an incapacitated relative. The individual employing the carer is entitled to a tax allowance of the actual cost of employing the carer up to a maximum of EUR 75,000. The allowance may be claimed at the marginal tax rate.
A personal allowance for premiums paid to an Irish Revenue approved permanent health insurance (PHI) scheme is available. The allowance may be claimed at the marginal tax rate. Tax relief is capped at 10% of total income for that year.
Expenses that may be deducted from taxable income are those that are incurred wholly and exclusively for the purposes of the trade/business.
Contributions to personal pension plans (retirement annuity contracts) are allowable as a deduction for self-employed individuals.
A trading/business loss can be offset against the gross amount of other income for that year.
Unused trading/business losses may be carried forward to the following year and used against that years trading/business profits arising from the same trade/business. Certain conditions apply.
In respect of capital losses, these are set off against chargeable gains arising in the same year. Unused losses may be carried forward indefinitely. Gains on development land may only be offset against losses on development land. Inflation relief may not operate to convert a monetary gain into an allowable loss or to increase a monetary loss.
Restriction of certain tax reliefs for high earners
Certain tax breaks available to high income earners are restricted (e.g. various property based tax incentives, film investment relief). With effect from 1 January 2010, a tapering restriction applies to individuals with income in excess of EUR 125,000 (before claiming the specified tax reliefs), with the full restriction applying to individuals with adjusted income in excess of EUR 400,000. The restriction may apply where the individual’s specified reliefs for the year exceed EUR 80,000. Where the maximum restriction applies, it results in an effective rate of Irish income tax of approximately 30%. Any relief not obtained in a particular tax year is carried forward. In the case of married couples, each spouse is treated separately when calculating this relief.