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Deed of Covenant – Tax Relief

A Deed of Covenant is a legally binding written agreement to pay an agreed amount to another person. You must not receive any benefit in return for paying this amount.

Covenants to certain individuals qualify for tax relief. You can claim relief on covenants to:

  1. One or more adults aged 65 or over. The relief you receive is restricted to 5% of your total income.
  2. Permanently incapacitated minors. A minor is a person under 18 years of age who is not married or in a civil partnership. You cannot claim tax relief on covenant payments you make to your own incapacitated child.
  3. Permanently incapacitated adults.

A Deed of Covenant must last for more than six years to qualify for tax relief. We recommend that you make a covenant that lasts for a minimum of seven years.

Covenants make most sense from a tax point of view when the covenant payer is being taxed at the higher rate of tax and the covenant receiver is paying at the lower rate

Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie

 

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