Tax Changes Effective January 2025

Several significant tax changes will come into effect from 1 January 2025, aiming to provide relief for workers, families, and those with caring responsibilities. However, some critics argue that these measures may not sufficiently address the ongoing cost-of-living pressures. Below is a detailed breakdown of the changes. Tax Changes Effective January 2025

Income Tax Changes

• Standard Rate Cut-Off Point:
  • Increased from €42,000 to €44,000.
  • Proportionate increases will apply for married couples and civil partners.
  Impact: This change marginally reduces the tax burden for middle-income earners, but critics highlight that it does little for those already struggling with high living costs.
• Increased Tax Credits:
  • Personal, Employee, and Earned Income Credits: Increase by €125 to €2,000.
  • Home Carer Tax Credit: Increased by €150 to €1,950.
  • Single Person Child Carer Credit: Increased by €150 to €1,900.
  • Incapacitated Child Tax Credit: Increased by €300 to €3,800.
  • Dependent Relative Tax Credit: Increased by €60 to €305.
  • Blind Person’s Tax Credit: Increased by €300 to €1,950.
  Impact: These increases provide additional support to families and individuals with caring responsibilities, but critics argue they fall short given the rising cost of care.

Universal Social Charge (USC) Changes

• 4% USC Rate Reduction:
  • Reduced to 3%, marking its second consecutive reduction.
• USC Entry Threshold Increase:
  • Threshold for the new 3% rate rises by €1,622 to €27,382.
  Impact: These changes aim to shield minimum-wage earners from higher USC rates, particularly as the national minimum wage rises to €13.50 per hour.

Rent Tax Credit

• 2025 Rent Tax Credit:
  • Increased to €1,000 for private tenants (€2,000 for jointly assessed taxpayers).
• Retrospective Increase for 2024:
  • Rent Tax Credit for 2024 increased to €1,000 (€2,000 for jointly assessed taxpayers).
  • Eligible taxpayers can claim an additional €250 (€500 for jointly assessed taxpayers) from Revenue.
  Impact: While the credit offers some relief, renters argue that it doesn’t address the broader issue of unaffordable housing costs.

Support for Electric Vehicles

• BIK Exemption for BEV Home Chargers:
  • Employers installing battery electric vehicle (BEV) chargers at employees’ or directors’ residences will be exempt from benefit-in-kind (BIK) tax.
• VRT Rate Change for Commercial BEVs:
  • Weight ratio requirement lowered from 130% to 125% to qualify for the €200 Category C Vehicle Registration Tax (VRT) rate.
  Impact: These measures aim to encourage the adoption of electric vehicles but may disproportionately benefit higher earners.

Conclusion

While these tax changes provide modest relief for workers, families, and environmentally conscious taxpayers, critics argue that they do not go far enough to address the challenges posed by soaring housing costs, childcare expenses, and energy bills.

Tax Changes Effective January 2025

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