AITI Chartered Tax Adviser
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How do I compute my income tax?

To compute your income tax liability, nine steps are required:
Step 1: Calculate your INCOME FROM EMPLOYMENT OR PENSION.
Step 2: Calculate your INCOME FROM SELF-EMPLOYMENT.
Step 3: Calculate your INCOME FROM INVESTMENTS AND PROPERTY.
Step 4: Total the three figures arrived at in Steps 1-3. This is your INCOME FROM ALL SOURCES.
Step 5: Deduct losses and “charges” to arrive at TOTAL INCOME.
Step 6: Subtract deductions allowable against total income to arrive at TAXABLE INCOME.
Step 7: Calculate GROSS TAX LIABILITY.
Step 8: Deduct TAX CREDITS to arrive at NET TAX LIABILITY.
Step 9: Add surcharges and interest, if applicable.

Step 1. To arrive at your INCOME FROM EMPLOYMENT OR PENSION:
Take your gross salary or wages from your P60 – you may also have to add social welfare payments that have not been subjected to PAYE;
Add: benefit in kind (car, preferential loan, expenses paid) if not includes on P60;
Deduct: Employee pension contributions;
Deduct: Schedule E expenses – uniform laundering etc;
Deduct: Revenue job assist – available if you were long-term unemployed prior to taking up the job;
Deduct: Seafarer allowance.

Step 2. To arrive at your INCOME FROM SELF-EMPLOYMENT:
Take your tax-adjusted income from an Irish trade an Irish profession or a foreign trade;
Deduct: Self-employed pension contributions;
Deduct: Carried forward loss, current capital allowances.

Step 3. To arrive at your INCOME FROM INVESTMENTS AND PROPERTY:
Take your rental income (net of interest and property-related expenses);
Deduct: Carried forward rental loss, current capital allowances;

Add: Interest that has not subjected to withholding tax;
Add: Income from foreign property;
Add: Dividends from Irish companies;
Add: Miscellaneous income.

Step 4. To arrive at your INCOME FROM ALL SOURCES, add the results of Steps 1-3.

Step 5. To arrive at your TOTAL INCOME:
Deduct: A loss incurred (in the current year) in a trade or profession;
Deduct: Expenditure on heritage buildings or gardens;
Deduct: Schedule D Case V excess capital allowances;
Deduct: Income covenanted to colleges (max 5% of income);
Deduct: Income covenanted to elderly relative or incapacitated person (no limit);
Deduct: Interest on loan to invest in a company or partnership.

Step 6. To arrive at your TAXABLE INCOME:
Deduct: Allowance in respect of carer for incapacitated person;
Deduct: Permanent health contributions;
Deduct: Foreign earnings deduction;
Deduct: Special assignee relief;
Deduct: EIIS investment;
Deduct: Film investment;
Deduct: Gift to Minister for Finance;
Deduct: Gifts to approved bodies;
Deduct: Owner-occupier allowance.

Step 7. To calculate your GROSS TAX LIABILITY:
Calculate your tax at the standard rate and at the higher rate;

Step 8: Deduct TAX CREDITS to arrive at NET TAX LIABILITY:
Deduct: Basic personal tax credit;
Deduct: Single parent child carer credit;
Deduct: Age tax credit;
Deduct: Incapacitated child tax credit;
Deduct: Dependent relative tax credit;
Deduct: Employee (PAYE) tax credit;
Deduct: Medical and dental expenses tax credit;
Deduct: Home loan interest tax credit – if not allowed at source
Deduct: Bridging loan interest tax credit;
Deduct: Rent tax credit;
Deduct: Blind person tax credit;
Deduct: Medical insurance tax credit – if not allowed at source;
Deduct: College fees tax credit;
Deduct: Dividend withholding tax paid;
Deduct: Deposit interest retention tax (non-SSA DIRT) paid;
Deduct: Professional services withholding tax (PSWT) paid in basis year;
Deduct: Relevant contracts withholding tax (RCT) paid;
Deduct: Foreign tax credit under double tax treaty;
Deduct: Preliminary tax paid;
Deduct: PAYE tax paid;
Deduct: Tax paid by donation of heritage items;
Add: Tax withheld from covenant payments made.

Step 9: Add surcharges and interest, if applicable.
Add: Late filing surcharge;
Add: Interest on late payment.

Step 10: High Earners’ Restriction
Recalculate where specified reliefs exceed 20% of income or €80,000, whichever is higher.