# How much can a spouse earn before paying 40% tax?



## Brendan Burgess (6 Sep 2017)

A friend of mine has asked me this. Her husband is paying the top rate of tax. She would like a part-time job but says it's not worth it because of the tax. 

Is the following reasoning correct: 

If she earns €24,8000 , she will get an additional 20% tax band of €24,800 

So her increased earnings would be:






I don't think she gets the Home Carer's Tax Credit, so she would not be losing that by working.

Brendan


----------



## Joe_90 (6 Sep 2017)

Thats a good summary of it.


----------



## Gordon Gekko (6 Sep 2017)

Yes, €25k is usually the magic number.


----------



## gnf_ireland (6 Sep 2017)

Also worth considering pension contributions here - depending on their age they could increase this by 20-40% if they put that money into a pension fund. This may be an advantageous option depending on age, especially if getting relief at the higher rate on it. 

Key to the numbers above is that they remain jointly assessed for tax purposes


----------



## RedOnion (6 Sep 2017)

I only realised recently how high it is. We're currently a single income household, but her CV got typed up very fast when I worked out the tax...


----------



## llgon (6 Sep 2017)

Do you know if she has any investment or other income in her own name? This could affect the calculation.


----------



## DB74 (6 Sep 2017)

Generally it's the cost of childcare plus loss of Home Carers Credit which makes it not worth it


----------



## gnf_ireland (6 Sep 2017)

Agree @DB74 but this also can change as childcare needs change - e.g. Hitting 1st class or children entering secondary school


----------



## Brendan Burgess (6 Sep 2017)

Hi guys

I have added in a new column for someone earning €8,000 

Effectively the first €8,000 is tax-free. 

Is that correct? 

Brendan


----------



## RedOnion (6 Sep 2017)

DB74 said:


> Generally it's the cost of childcare plus loss of Home Carers Credit which makes it not worth it


I actually looked at reducing my hours, and my wife getting a part-time job. For any married couple with an income over 77,600 after pension contributions, they are better off by 8k per annum after taxes where each person earns at least 33,800 versus where there's a single earner.

Not impossible for a professional couple.

(She hasn't let me cut back to 3 day week yet).


----------



## RedOnion (6 Sep 2017)

Brendan Burgess said:


> View attachment 2177
> Hi guys
> 
> I have added in a new column for someone earning €8,000
> ...


Yep. So if you got a part time job now, you'd get a good chunk of income for remainder of the year tax free.


----------



## Brendan Burgess (6 Sep 2017)

RedOnion said:


> Yep. So if you got a part time job now,



That's a very good point.  A few months work at Christmas would be tax-free for most people. 

Brendan


----------



## Slim (7 Sep 2017)

Gordon Gekko said:


> Yes, €25k is usually the magic number.


Gordon. Would you mind explaining that for me, please?


----------



## Steven Barrett (7 Sep 2017)

€24,800 is the allowable earnings for the second spouse at 20%


Steven 
www.bluewaterfp.ie


----------



## RedOnion (8 Sep 2017)

To put some real examples on this after talking to some colleagues working part-time. For someone working a 3 day week.
Assuming no other income, and spouse is in higher tax bracket.

Someone on 40k pro-rata for a 3 day week falls under the threshold.
With a 20% pension contribution it pushes up to 51.6k.

Someone returning to work on 1st October on 60k pro-rata would only pay 200 income tax this year (extra for PRSI). If it's contract work, or using parental leave, you could work 8 months a year without going into higher bracket. Again, 20% pension pushes this up to 75k, and you're off work for the school holidays.


----------



## torblednam (8 Sep 2017)

What's this thing about the pension contribution, can someone explain it to me please?!


----------



## sooty (2 Nov 2017)

Hi can i ask a question about this - i am currently not working - husband gets all tax credits - am i correct is saying if i go back to work his tax credits will reduce by E1650?


----------



## bhoy1967 (26 Jan 2018)

HI,

Can I ask a question in relation to this?

My wife worked a few weeks leading up the Christmas last year, I am in the process of submitting my P12 but I can't seem to add her employee tax credit, Can you claim both the employee tax credit and the home carers tax credit?

Thanks a lot.


----------



## cian8 (12 Mar 2020)

RedOnion said:


> To put some real examples on this after talking to some colleagues working part-time. For someone working a 3 day week.
> Assuming no other income, and spouse is in higher tax bracket.
> 
> Someone on 40k pro-rata for a 3 day week falls under the threshold.
> ...



Apologies for resurrecting an old thread but this seems relevant to my situation. If anyone could check my workings + logic here it would be greatly appreciated. I am on higher rate tax, also with rental income, my wife is currently working 3 days per week and availing of parental leave 2 days per week. If it would be feasible to increase pension contribution three-fold and only have circa 7% reduction in monthly take home it would seem a no-brainer! That is if I understand correctly.

Thanks in advance.


20% cut-off26300​Spouse Salary50874​3 day week30524.4​Pension5%​14%​1526.22​4273.416​Taxable income28998.18​26250.98​Tax 20%5260​5250.197​Tax 40%1079.27​0​Tax Total6339.27​5250.20​Take home22658.91​21000.79​


----------



## RedOnion (12 Mar 2020)

cian8 said:


> also with rental income


Is the rental income in your sole name, or joint names?


----------



## cian8 (12 Mar 2020)

RedOnion said:


> Is the rental income in your sole name, or joint names?



RedOnion - is there an easy way to check? I only fill out one form every year to indicate the rental income? But that does ask me to input my wife’s pay from previous year etc. It is under some threshold and Revenue collect what is due by reducing my tax credits the following year.


----------



## relax carry on (12 Mar 2020)

cian8 said:


> RedOnion - is there an easy way to check? I only fill out one form every year to indicate the rental income? But that does ask me to input my wife’s pay from previous year etc. It is under some threshold and Revenue collect what is due by reducing my tax credits the following year.



It's quite easy, is the rental property owned jointly by you? If it is, the rental income is split between you and each portion is declared in your tax return each year. So if it's a 50/50 split, 50% is declared under you and the other 50% is declared under your spouse.


----------



## RedOnion (12 Mar 2020)

cian8 said:


> It is under some threshold


If it's under the level that you have to do a Form 11, it won't materially impact your calculations. She might have scope to increase pension slightly above what you have at get higher rate relief.


----------



## cian8 (12 Mar 2020)

See above! This is from 2017 but is the most recent I can find. The property is jointly owned. I can't remember every making a decision or being asked whether to split the income or not, but, maybe I did. Anyway it seems to only be in 'my' column.

Is this important? Should I ask to have it split between us?




RedOnion said:


> If it's under the level that you have to do a Form 11, it won't materially impact your calculations. She might have scope to increase pension slightly above what you have at get higher rate relief.



Yes, correct I complete a Form 12 every year.

So are the calculations in my original post accurate?


----------



## RedOnion (12 Mar 2020)

cian8 said:


> So are the calculations in my original post accurate?


They look to be.
Roughly speaking 2,750 extra pension at 40% tax relief results in 1,650 reduction in tax home pay. So looks correct


----------



## cian8 (12 Mar 2020)

RedOnion said:


> They look to be.
> Roughly speaking 2,750 extra pension at 40% tax relief results in 1,650 reduction in tax home pay. So looks correct



thank you


----------

