# How to calculate effect on wages of being a SAHM



## dody (4 Jul 2011)

I want to calculate our income if I took a career break to mind my 3 children. I know my credits transfer to husband and we can recieve the carers tax credit but how to I calculate how much this translates into net wages. We are both teachers and with childcare costs of €1400 pm it is looking like I would be financially better not working.


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## DB74 (4 Jul 2011)

Roughly speaking and assuming that your husband earns at least €41,800 then his take-home pay will increase by €4,350 per year. This is calculated as follows:

Increase in 20% band = €9,000 x 21% = €1,890
Transfer of married credit = €1,650
Home Carers Credit = €810

Total = €4,350


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## deadlyduck (4 Jul 2011)

For such queries, I have uploaded a spreadsheet calculator at http://taxcalc.eu/monthlyss


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## danash (4 Jul 2011)

DB74 said:


> Roughly speaking and assuming that your husband earns at least €41,800 then his take-home pay will increase by €4,350 per year. This is calculated as follows:
> 
> Increase in 20% band = €9,000 x 21% = €1,890
> Transfer of married credit = €1,650
> ...


 

Why would the 20% band increase when they are going from a dual income to a single income family....would it not contract ?

The only benefit is the transfer of credits which you are seeing already....in my opinion you will lose money as the system ( last time I checked...open to correction ) favours dual income families.


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## DB74 (4 Jul 2011)

danash said:


> Why would the 20% band increase when they are going from a dual income to a single income family....would it not contract ?



The OP's husband's 20% band will increase by up to €9,000 per year as this is the maximum of unused 20% band that can be transferred between spouses. The remainder of the OP's 20% band is lost, as is her PAYE credit which also cannot be transferred (although if she receives taxable Social Welfare payment, then the PAYE credit would normally cover any potential PAYE on this income).

So, assuming that the husband earns at least €41,800, there is now €9,000 of his salary which is taxed at the 20% rate instead of the 41% rate, which is a saving of €1,890 (€9,000 x 21%)


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## danash (5 Jul 2011)

DB74 said:


> The OP's husband's 20% band will increase by up to €9,000 per year as this is the maximum of unused 20% band that can be transferred between spouses. The remainder of the OP's 20% band is lost, as is her PAYE credit which also cannot be transferred (although if she receives taxable Social Welfare payment, then the PAYE credit would normally cover any potential PAYE on this income).
> 
> So, assuming that the husband earns at least €41,800, there is now €9,000 of his salary which is taxed at the 20% rate instead of the 41% rate, which is a saving of €1,890 (€9,000 x 21%)


 


Are you referring to the impact in the current tax year...? If so then that may be correct ...however the implication for each subsequent year is more stark.....if they are moving from a dual income married couple to a single income married couple then the 20% will DECREASE by up to 23K pa....assuming the partner earns more than 41K.....


http://www.revenue.ie/en/tax/it/leaflets/it1.html#section3


As far as I know the tax system positively discriminates towards dual income couples.


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## DB74 (5 Jul 2011)

I was specifically speaking about the husband's salary ONLY and I assumed that the OP currently has all of her tax credits.

You are correct about the tax system favouring dual-income couples.


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## danash (6 Jul 2011)

DB74 said:


> I was specifically speaking about the husband's salary ONLY and I assumed that the OP currently has all of her tax credits.
> 
> You are correct about the tax system favouring dual-income couples.


 
The OP is looking for the overall impact of taking a career break.....as far as I can see for 2012 the credit situation would be a zero sum game as they are seeing that benefit already. His salary taxable at 20% would however decrease by every euro between 41800 and 64000. This could cost them up to 23800 x 21% in extra tax. 

It is not a small amount to pay in extra tax at the same time as losing one salary.


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## DB74 (6 Jul 2011)

The OP is looking for the impact in her husband's take-home pay as I think we safely assume that her own take-home pay will drop to ZERO if she gives up work.

You are incorrect in assuming that her husband's 20% band would decrease as the max that any one person can earn at the 20% band is €41,800. Her husband *CANNOT* earn €64,000 at the 20% rate because the OP cannot transfer any more than €9,000 of her own 20% band to her spouse.


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## danash (7 Jul 2011)

She wont have any income to transfer so the net effect is the excess of the husband's income over 41K will now be taxed at 41%.

Their income will decrease by 100% of the first salary and the tax differential of the husband's salary.


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## 44brendan (7 Jul 2011)

DB74 said:


> The OP is looking for the impact in her husband's take-home pay as I think we safely assume that her own take-home pay will drop to ZERO if she gives up work.
> 
> You are incorrect in assuming that her husband's 20% band would decrease as the max that any one person can earn at the 20% band is €41,800. Her husband *CANNOT* earn €64,000 at the 20% rate because the OP cannot transfer any more than €9,000 of her own 20% band to her spouse.


 
Exactly right.


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## danash (8 Jul 2011)

44brendan said:


> Exactly right.


 

Are you sure..?..as a dual income couple the 20% bracket increases- I believe-  by up to 23800. If there is no dual income then it is set at 41800.

See link above.



As they are currently a dual income (married) couple they would/should be receiving this relief. By  going to a single income couple they lose this dual income status and the husband's income is taxed at 41800 @ 20% and 41% thereafter. 

This would incur the decrease in income I stated above....but am not an accountant.

The OP needs to indicate the husband's current income to give a full answer.


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## Mrs Vimes (8 Jul 2011)

danash said:


> As they are currently a dual income (married) couple they would/should be receiving this relief. By  going to a single income couple they lose this dual income status and the husband's income is taxed at 41800 @ 20% and 41% thereafter.



The husband's income is taxed at a maximum of 41800 @ 20% regardless of whether the wife is working (it could be less if she is using more than the minimum rateband). If the wife is working she can have up to 23800 @ 20% which is otherwise lost.

How a one-income married couple is at a disadvantage is that a couple where both are earning 30,000 pay less tax than a couple where one is earning 60,000 and the other isn't earning. Otherwise the wife could get a job for one day and earn 100 in the whole year just to give the husband the increased 23800 rateband.


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