DublinHead54
Registered User
- Messages
- 1,064
People get overly confused by this stuff.
You can only offset pension contributions against employed or self-employed income.
If you do it through payroll, you get the relief at source.
But lots of people don’t do that, and when they’re submitting their tax return for the prior year, they say “Ah, I see the tax on my rental income is €4k...I’ll bang €10k into my pension and make that go away!”
And cash-wise, that’s what’s happening, but in reality it’s a €4k tax liability on rental income being offset against a €4k refund due for an AVC against employed/self-employed income.
What rate is the mortgage at?
Even if it’s high, because of the tax deduction for mortgage interest, you’re plan probably makes sense.
Yes, you should maximise your AVCs.
However, I think it’s best to do it through payroll.
Personally I find it easier that way, as you just think that your net monthly pay is the after-AVC amount.
Versus writing big lumpy cheques which can be painful.
You want your AVC to become something like your home mortgage or a bill that just becomes second nature.
You will see it through payroll. If you are paying tax at the 40% then add 1k per month to the pension and your monthly net pay will reduce by only 600. You will still need to 'hand over' the 4k to revenue in October for your rental income.If I do it monthly how would the play out come the end of the year? Would I see a tax bill on rental income of 4k, but a tax credit of 4k from the monthly AVC? or does the tax relief amount flow into my net pay and aggregate? I have somewhat confused myself.
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