Married or not, who pays the least tax?

Are you paying much of your earnings on taxes? What if you’re told that you can reduce your taxes just by .. getting married? You heard it right. As much as you would hate marriage proposals or getting hitched, there are benefits especially when paying taxes (read, your hard earned money). Married people (both working or one of them working) end up paying less tax than the ones who are single or in a cohabiting relationship. How? Why?

Preference for families by the tax system

The tax system has a preference for couples who are married or have a child. Especially, couples where both husband and wife earn their income, they pay the lowest taxes when compared to unmarried people and the ones cohabiting with one income. On the other hand, cohabiting couples with two incomes also get advantages on their taxes.

For example, if the income is €20000 per annum, a single person will pay taxes up to 13%, i.e. approximately €2500 in taxes. In case of a married couple where one of them is an earner, they will pay 6% of their income as taxes (€1200) while a married couple with both of them earning will not pay any taxes. This means that they can save up to 13% of their income every year.

Having a child? Pay even lesser tax

The news is even sweeter for married couples with a child. Be it with one or two incomes, their taxable income will be NIL. For a cohabiting couple with one income and a child, an annual earning of €20000 will still make them pay taxes of up to 13%. But if they were to be married, they can save the 13% of taxes (~€2500 every year). A single person with one child earning €20000 a year will have to pay 6% of their income as taxes.

Therefore, if a single person or a cohabiting couple with a single income have a child, they can reduce the amount paid through taxes every year.

Choose their assessment type

Married couples can choose from one of the three types of tax assessments: joint, separate, and single that will help to reduce the overall tax paid for the year.

With joint assessment, the couple is eligible for transfer of their unused tax credits among each other. Separate assessment is very similar to joint assessment, except that the tax allowances will be equally split between the husband and wife. A joint and separate assessment is beneficial for couples where they have two incomes and one spouse has earned more than the other. In a single assessment, the husband and wife will be treated as two single persons for tax purposes (in case of divorce or forced separations).

Tax Concessions

The tax system also provides various tax concessions for married couples where –

  • There will be no Capital Gains Tax (CGT) when assets are transferred between the husband and the wife
  • No stamp duty when transferring the assets between the couple
  • No Capital Acquisition Tax (CAT) when any gifts of gratitude is shared between the couple

Self-employed?

If you run your own business and you are married, you can ensure tax savings of €5000 every year on your income. For this, your spouse should be a part of your business and have an income of €25000 that can be shown as a part of your business to avail the tax benefit.

To understand how you and your spouse can save on taxes, speak to our expert consultants today. Your first consultation is on us! Contact us here

5 Most Commonly Overlooked Business Tax Deductions

Every year, business owners face their toughest and the most dreaded time – paying taxes. Though the business performs exceptionally well during the year, the amount payable as taxes is still a lump sum. But, there’s good news! There are lots of ways business owners can reduce the tax amount payable every year. One most popular and common method is tax deductions. Not many business owners are aware of this “nifty but priceless” method to lower their tax amount.

Here are the 5 most commonly overlooked business tax deductions by business owners. It’s highly advisable that you get in touch with your tax planning expert or look out for the best accountants in Ireland.

1.    Travel Expenses

Travelling is a part of the job for business owners. Do you use your car for business trips or your daily office commute? Expenses such as parking and toll charges, vehicle insurance fees, fuel, vehicle breakdown and repair charges, maintenance charges will be eligible for tax deductions. Additionally, if your travel involves a flight/train/bus journey, a hotel stay, all these expenses can be accounted for tax deductions.

2.    Accounting, Consultancy, Bank Expenses

Any fees that you pay related to your business such as amount paid to your accountant for preparing your tax returns, or business consultants are eligible for tax deductions. Even bank fees and finance payments such as credit card payments specific to your business will qualify for deductions. Interest charged on business loans can also be claimed as tax deductions. If you paid for the cost of education and/or training of your employees, the cost can be claimed as a deduction.

3.    Advertising Costs

Any business will require paid advertising efforts. For example, printing brochures and flyers, or online advertising as a part of your marketing campaigns. This is very crucial for the success of the business. These advertising costs can be tax deductible. It’s however recommended that you speak with your accountant to validate the expenses before paying your taxes.

4.    Personal and Home Office Expenses

As a business owner, you may be using a lot of your personal things for the business. For example, mobile phones, computers, stationery items, and more. You can add up these expenses and get them deducted when paying your taxes. Though not as significant as other costs, you can still save a few thousand dollars.

If you have a dedicated office premise, you can claim the rent paid, electricity and other associated costs as expenses. If you are using a room in your house as office space to conduct your business, you can claim the expenses under the Home Office deduction category.

5.    Medical and Insurance Expenses

Business owners have the liberty to deduct 100% of the medical expenses and insurance costs when paying their taxes (not the business tax, but personal tax). You can also claim the expenses of your spouses or your dependents.

As a business owner, you make money; and it’s important at the same time to pay your taxes. Your business might not be eligible for all the deductions listed, or there might be some restrictions.  Get in touch with the best accountants in Ireland and plan your taxes in advance.

 

Saving is not enough. Invest to make a fortune

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful”, says Warren Buffett.

If you have just started to make a living, investing may yet not be on your radar, but successful investors advice just opposite. A lot of people spend the initial five years of their career trying to earn just enough to meet ends. They are more concerned about paying rents, buying food and living through day to day expenses. Perhaps the reality is that our needs will never end, rather increase year by year, and no matter how much you earn, even after 5 or 10 years, your salary or a single source of income will never be enough for you to achieve your big goals.

However, if you can pull out even a small amount of money for investment purposes, (the earlier you invest, the better), you’ll be on your way to creating good fortune for yourself in the coming years. It’s all about determining your financial goals and being a step ahead of everyone else. 

Investing in the right place, at the right time is all one needs to reach the heights of success. Understanding the market conditions and analyzing your goals in depth is the only way to find the most resourceful investment options for yourself.

That being said, so why you should begin investing right now? How can it help you accomplish your big goals in the future? Let’s take a look at a few factors that are sure to change your perception about investment, regardless of the risks involved.

Improve Financial Well-being – Sound investment means increased cash flow, which can lead to a substantial increase in capital. This allows you to consider your opportunities with a broader perspective and improve overall financial aspects of your life.

Family Security – Long-term investments planning can always provide for your family when the need arises. Family’s financial security is one of the key factors that compel people to consider investing in definitive portfolios, such as insurance, endowment policies and so on.  A proper financial plan takes into account your personal circumstances and objectives to fit your needs.

Improved Standard of Living –  While savings account would serve you nothing more regular bills, investing the money saves in profitable ventures can help you reach your financial goals much faster.  Whether you wish to buy an SUV after 3 years, or a house in a suburb, your goals will determine the best investment options for you, enabling you to accomplish them sooner as compared to people who don’t invest.

Financial Security – In the times of inflation and recessions, having a second and/or third income can save your from economic crises during recessions. Savings created from good investment planning can prove beneficial in difficult times; for instance, replacing any lost income, when you are unable to continue your job.

In conclusion, money plays an important role in society and investing at the right time, in the right place can create enormous wealth for your future. Making smart investment decisions can pay off big time, regardless of your occupation, demographics and age. As much as it is advised to start investing as early as possible, beginning late can also be fruitful if you know how to choose the right basket to put your eggs in.

Want to know what’s the best way to invest the tax returns that you are about to receive in a few months? Consult the experts today.