Kieran Coughlan: Minimising headaches in this taxing time for students

Colleges and universities across Ireland have reopened after their summer recess.

For many families, the onset of a new academic year signifies an upcoming sizeable outlay.

The costs of attending third level education has increased substantially over recent years, and in the current year this trend has continued with a jump in accommodation costs, particularly in Dublin.

For most undergraduate students, the State picks up the tab for the tuition fees with the costs principally comprising of the student contribution €3,000, books and materials, travel costs and accommodation in the case of students living away from home.

All in all, the costs can be very substantial. Figures prepared by Dublin Institute of Technology suggest the costs can surpass €11,000 per year in the case of students living away from home, meanwhile even for students living near home the costs come close to €7,000.

In the case of families where two or more students are attending third level, some relief is available in the form of a tax credit.

The tax credit is applicable in the case of the student contribution payable in respect of approved third level courses and tuition fees.

In terms of the student contribution payable for the second or subsequent student, the tax credit can be worth up to €600 per annum (calculated at 20% relief).

Tax credits are only available to the extent that the individual has taxable income. To that end, most students would not be earning income sufficient to claim the credit against PAYE or income tax paid. In that regard it is generally more tax efficient for parents to pay the student contribution on behalf of the student leaving the student pay their own personal costs instead.

In the case of farmers and other self employed persons, it is well worth exploring whether there is a case for making tax deductible wages to their child in respect of work performed by that child in their business for example over the previous summer months.

This would leaving that child in a position to pay their own personal costs of attending college. In the case of children employed by farmers, where a child has no other source of income, the payment of wages of say €8,000 per annum would typically result in a total liability to Income Tax, PRSI, and Universal social charge for the student of just €160, meanwhile the farmer benefits from a significant reduction in their taxable farm profits.

Of course Revenue will only accept such wage payments as being deductible in the case of remuneration for genuine employments, the test used by Revenue would seek to establish whether the expense of wages was wholly and exclusively for the purposes of the business.

Additionally in the case of farmers who children are attending agricultural college courses, there can be the added benefit of claiming such college fees as tax deductible being the training costs of an employee.

Meanwhile, students and their parents should also remember to consider whether any grant assistance might be available through the SUSI (Student Universal Support Ireland). Students who have been employed during the summer months and who have paid PAYE should consider obtaining a refund of tax by applying to their local tax office (possible through form P50).


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