Ireland

Employment expenses

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.

Pension contributions

Contributions to Revenue-approved occupational pension schemes are allowable deductions for employees in respect of PAYE. There is no relief from PRSI or USC for employee pension contributions. No deduction is available in calculating employer PRSI contributions in respect of pension contributions made by employees. Ordinary employer contributions to a Revenue approved scheme are allowed as a deduction for tax purposes. 

The annual earnings limit that (along with age-related percentage limits) determines the maximum tax-relievable contributions for pension purposes is EUR 115,000. 

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:

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.

The Finance Act 2022 introduces changes to Personal Retirement Savings Accounts (PRSAs) such that employer contributions to an employee’s PRSA will not be considered a taxable benefit-in-kind from 2023.  It also removes the requirement for both the employer and employee contributions to a PRSA to be treated as if they had been made by the employee for tax relief purposes.

Personal deductions

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. 

Mortgage interest relief

A temporary one-year tax credit has been introduced for taxpayers who have made payments in respect of a qualifying loan for a principal private residence. The relief will be available to homeowners with an outstanding mortgage balance of between EUR 80,000 and EUR 500,000 as of 31 December 2022.

The credit will be available in respect of 2023, on the increase in interest paid in 2023 over interest paid in 2022. The amount qualifying for relief at the standard rate of tax will be capped at EUR 6,250 per residence, equivalent to a maximum tax credit of EUR 1,250.

Health expenses

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), Start-Up Relief for Entrepreneurs (SURE), and Start-Up Capital Incentive (SCI) 

EII is a tax relief that aims to encourage individuals to provide equity-based finance to trading companies. It provides tax relief for investment in micro, small, and medium-sized trading companies. The scheme allows an individual investor to obtain income tax relief on investments up to a maximum of EUR 250,000 per annum for investments made on or after 1 January 2020 (lower investment limits applied in prior years). The Finance Act 2019 introduced a higher investment limit of EUR 500,000 for investments made on or after 1 January 2020 for those that invest for a minimum period of seven years. From 1 January 2024, a number of changes were made to the relief, which include the minimum holding period required to obtain relief is being standardised to four years for all investments and the investment limit on such investments is now EUR 500,000 for all investments. The rate of relief which an investor can claim tax relief was also amended so that the level of relief will be linked to the type of investment made and the level of risk associated with that investment. The minimum investment in any one company is EUR 250. Individuals interested in EII can invest directly through a private placement or through a Designated Investment Fund. Relief is available within the year of assessment in which the investment is made by the individual into the designated fund. This scheme has recently been extended to 2024.

The SURE, formerly known as the Seed Capital Scheme, is a slightly more generous version of the EII that targets individuals who leave PAYE employment to set up their own companies. The SURE investor may have been a top rate taxpayer when employed, so the scheme is designed to allow him/her to elect to shelter income earned during any of the previous six years in order to maximise the tax rebate. The maximum investment that can qualify under SURE is EUR 700,000 (EUR 100,000 per annum for the previous six tax years and EUR 100,000 in the current year). Any unused relief is available for carry forward for offset against total income in future years. 

The SCI relief was introduced for 2019 to 2021 and targets very early-stage micro companies. SCI seeks to relax particular conditions for early-stage micro companies that could otherwise prevent founders from raising qualifying starter capital for the company from close relatives. A micro enterprise is a company with less than 10 employees and either turnover and/or balance sheet totals less than EUR 2 million. There is a lifetime cap of EUR 500,000 on the investments made.

Standard deductions

Please see Personal exemptions below and the Other tax credits and incentives section.

Personal allowances

A tax 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.

Business deductions

In general, arm’s-length expenses may be deducted from taxable income if they are incurred wholly and exclusively for the purposes of the trade/business. Capital items expensed to a company’s profit and loss account are not tax-deductible. 

Contributions to personal pension plans (retirement annuity contracts) are allowable as a deduction for self-employed individuals.

Losses

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.