How does Home Carer's Tax Credit Work?

Brendan Burgess

Brendan Burgess

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From the Revenue's [broken link removed]

Home Carer’s Tax Credit A tax credit at the standard rate of tax (20%) in the tax years 2005 and 2006 is available for married couples where:

  • One spouse (the ‘home carer’) works in the home caring for one or more dependent persons, i.e., a child for whom they are entitled to Social Welfare child benefit, a person aged 65 or over, or a person who is permanently incapacitated by reason of mental or physical infirmity and the qualifying person normally resides with the couple for the year.
  • ...
The tax credit is not available to married couples that are taxed as single persons. Neither is the tax credit available to married couples with combined incomes over €38,400 in the tax year 2005 and £41,000 in the tax year 2006 and who claim the increased standard rate tax band for dual income couples.
Click to expand...

Increased standard rate tax band: €9,000
Tax saved: €1890 ( 21% of €9,000)

This income limit is not mentioned in [broken link removed] the guide to the Home Carer's Tax Credit.

Brendan
 
It doesn't appear to have been mentioned in the Budget speech, so presumably the amounts remain the same?

Tax Credit: €770

Limit on income: €41,000


Brendan
 
Posted in another thread too but for completeness, my understanding is that the €41K limit only applies when the couple are dual income with one income (the homecarer's) less than the €6,020 earnings limit. If there is only one income, the home carer's tax credit is due regardless of the size of the single income. I used ROS offline and the homecarer's credit comes through with a single income in excess of €41K. The €41K only comes into play when deciding which of two credits is better - the homecarer one or the increased band for dual income couples - if there's only one income, the homecarer credit is by default the better option.
 
Orka's explanation makes sense to me, as I've claimed this credit in recent years with income in excess of the €41k.
 
If you look at budget 2000 speech you will see no mention of home carers credit!
In 2001 the credit of £660 was introduced to balance the loss of £660 by the single income family paying more tax at the higher rate.

As the Minister has developed on individualisation over the years he has eroded the value of the home carers credit to this point now where a couple both working earning €35,000 each are better off by €4480 euro than a couple where only one is working and earning €70,000. 19,000 @ 21% less the 770 credit = 4480. (I am open to correction on the figures, it’s probably more when you take the single PAYE credit into account)

Depending on your point of view this is one of the biggest scandals in Irish tax history. The historic method of giving the “one earner family” the same financial position as the dual income one is clearly being shelved.
 
A point to watch out for - if you got the credit in one year you will not be excluded from it in the following year simply by virtue of the fact that the person claiming's income has exceeded the threshold (6k odd).
However Revenue's software can't handle this fact and if you are trying to claim it you will be in for a few phone calls back and forth and not be put off by a staffmember who believes their computer is bible.
They have to give it to you as "misc credit" or something similar.
It really does seem to a credit that was given grudgingly by Mr McCreevy and now revenue wish would just go away. What minister for finance is going to put a line through it.
 
Thanks for the clarifications.

Please don't go off topic on the fairness of the Tax Credit. Open a new thread if you want to Let Off Steam.

Brendan
 
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