Understanding the difference between tax credits and tax deductions in Ireland can help you maximise your refund. While they both reduce your tax bill, they work very differently—and knowing this difference can help you claim smarter.
Our specialists know exactly how to optimise both credits and deductions for maximum benefit. Here's what you need to understand.
📊 Quick Summary
- Tax Credits: Reduce your tax bill directly (€1 credit = €1 less tax)
- Tax Deductions: Reduce your taxable income (value depends on your rate)
- Key insight: Credits are generally more valuable
What Are Tax Credits?
Tax credits reduce your tax bill euro-for-euro. If you have a €1,000 tax credit, your tax bill is reduced by exactly €1,000. This makes credits very valuable.
Common tax credits in Ireland include:
- Personal Tax Credit: €2,000
- Employee Tax Credit: €2,000
- Rent Tax Credit: Up to €1,000
- Single Person Child Carer Credit: €1,900
- Home Carer Tax Credit: €1,950
What Are Tax Deductions?
Tax deductions (also called reliefs) reduce your taxable income before tax is calculated. The actual saving depends on your tax rate:
- At 20% tax rate: €1,000 deduction saves €200
- At 40% tax rate: €1,000 deduction saves €400
Common tax deductions include:
- Flat Rate Expenses: Work expense allowances
- Pension contributions: Reduce taxable income
- Working From Home: Electricity, heating, broadband
Comparison Example
💡 Key Insight
This is why rent tax credit (€1,000 credit) is more valuable than €1,000 of flat rate expenses (€200-€400 saving). Our specialists know how to maximise both to get you the best total refund.
Medical Expenses: A Special Case
Medical expense relief is calculated at a flat 20%, regardless of your income tax rate. So €1,000 in medical expenses gives you €200 relief, whether you're paying 20% or 40% income tax.
This ensures everyone gets the same proportional relief on healthcare costs.
Why This Matters for Your Refund
Understanding credits vs deductions helps you see why certain claims are so valuable. For example:
- The rent credit (€1,000) beats €1,000 of rent deductions every time
- The SPCCC (€1,900) is worth €1,900 off your tax bill—plus an increased rate band
- Flat rate expenses are deductions, so actual savings depend on your tax rate
Our specialists optimise both credits and deductions to maximise your total refund. The average refund is €1,080.
Maximise Your Credits and Deductions
Our experts will find every credit and deduction you're entitled to.
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Frequently Asked Questions
Can I claim both credits and deductions?
Absolutely. Most people are entitled to multiple credits (like Personal and Employee) and various deductions (like flat rate expenses). Our review ensures you claim everything available.
Which is better—credits or deductions?
Credits are generally more valuable euro-for-euro because they directly reduce your tax. But the best approach is to claim everything you're entitled to—both credits and deductions.
Do unused credits carry forward?
Generally no—most credits must be used in the year they apply. This is why it's important to claim promptly. However, you can backdate claims for up to four years.
