Dáil Éireann Debate, Thursday - 17 June 2021
233. Deputy Éamon Ó Cuív asked the Minister for Finance the reason persons in receipt of the carer's tax credit who have a small income, including the carer's allowance are not allowed the extra €26,300 income at 20% which is normally allowed for two married persons or persons in a civil partnership who have two incomes thus diluting the benefit of the carer's tax credit considerably; and if he will make a statement on the matter. [32672/21]
View answerIn terms of providing a context for the present arrangements, the current structures with regard to tax bands of couples who are married or in civil partnerships has been in place for the last 20 years or so. The previous Commission on Taxation in their 2009 report observed the following:
"However, in relation to income tax, a “hybrid” arrangement has been in place since 2000, with regard to the tax band structure and credits that apply to married couples. We consider that this arrangement should remain in place as it represents a balance between, on the one hand, acknowledging the choices families make in caring for children and, on the other, taking account of the need to encourage labour force participation."
This is an area that is kept under review.
On the specific arrangements in place, I am advised by Revenue that the home carer tax credit may be claimed by a married couple or civil partners where one spouse or civil partner (the ‘home carer’) cares for one or more dependent persons.
Eligibility for the home carer tax credit is subject to a number of conditions, as follows:
- The married couple or civil partners must be jointly assessed to tax;
- The home carer must care for one or more dependent persons; and
- The dependent person(s) must normally reside with the married couple or civil partners for the tax year, however certain exceptions apply where the dependent person is a relative.
To obtain the full tax credit (€1,600 for 2021), the home carer’s income must not exceed €7,200 in the tax year. Where the home carer’s income is over €7,200, the tax credit available is reduced by one half of the excess amount earned over this limit. The home carer tax credit will therefore not be available for 2021 where the home carer’s income exceeds €10,400. Both carer’s benefit and carer’s allowance payments from the Department of Social Protection are disregarded for the purposes of determining the annual income threshold of €7,200.
The standard rate band, where one spouse or civil partner is in receipt of income, is currently €44,300. For dual income couples, this amount can be increased by the lesser of €26,300 or the income of the lower earner. The maximum standard rate band for a dual income couple in 2021 is therefore €70,600.
By virtue of the legislation contained in section 466A Taxes Consolidation Act 1997, a couple or civil partners cannot claim both the increased standard rate band for dual income couples and the home carer tax credit in the same year. They may however claim whichever of the two is more beneficial to them.
Revenue will grant whichever relief – the home carer tax credit or the increased standard rate band - will provide the most beneficial treatment for the taxpayer. Further details on determining whether the home carer tax credit or the increased standard rate band may be more advantageous can be found in section 6 of Tax and Duty Manual Part 15-01-29 published on Revenue's website (https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-29.pdf).
Alternatively, taxpayers may contact the National PAYE helpline at 01-7383636 where they will receive any assistance required to establish the more advantageous option, based on their individual circumstances.
