As the Deputy will be aware, the home carers allowance, now a tax credit, was introduced in Finance Act 2000 to recognise the contribution made by a spouse who remains working in the home in order to care for certain dependent persons who may not be the spouse of the claimant. It may be claimed by a married couple who are jointly assessed for tax. The dependent person is defined as a child in respect of whom child benefit is being paid, a person aged 65 years or over, or a person who is permanently incapacitated by reason of mental or physical infirmity. This definition includes a person related by marriage to the claimant and a person in respect of whom the claimant is or was the legal guardian. The tax credit currently amounts to €770 per annum.
The provision is intended to cover situations where a spouse has forfeited a second income to care for dependents in the home. However, there is an income disregard, whereby the home carer may have some income in their own right without affecting their spouse's eligibility for the tax credit. In addition there is a taper system, which means the tax credit is not lost all at once when income exceeds the amount of the disregard. The tax credit is due in full where the home carer's annual income does not exceed €5,080 and where it exceeds that amount, the tax credit is reduced by half the excess. Effectively €1 of tax credit is subtracted for every €2 by which the income exceeds €5,080, so that where the annual income exceeds €6,620 no tax credit is due.