Tax Credits & Reliefs >> Deeds of CovenantTags: tax saving tips, elderly parents, tax refunds
Who can Claim?
Tax Relief may be claimed on covenants made:
To permanently incapacitated individuals. There is No relief due on covenants from a parent to his/her permanently incapacitated minor child.
To elderly individuals i.e. aged 65 or over. Restricted to 5% of total income.
For research, teaching of natural sciences and to certain bodies for the promotion of Human Rights. Restricted to 5% of total income.
Method of Payment: The payer deducts income tax at the 20% rate when making the payment. The recipient receives a net of tax payment and is entitled to a refund and must reclaim same from the Revenue. The payer obtains further tax relief when finalising their tax position for the tax year involved amounting to 225 of the gross payment.
TAX SAVING TIP
Deeds of Covenant are a very good way of providing financial assistance to elderly parents in a tax efficient manner. Depending on the income of the parents they might not be taxable and at the same time the children will receive tax relief at 41% on payments made.