Written Answers. - Tax Code.
Paul McGrath
Ceist:
228
Mr. McGrath
asked the
Minister for Finance
the income tax, PRSI and other levies payable by a family with gross income of ?56,000 under the PAYE system where the family has one income, two incomes for the category of families with dependant children and no dependant children; and if he will make a statement on the matter.
[8058/02]
The position is that:
a) the tax rates and bands for a married couple for 2002 are as follows–
Married couple (onespouse with income)
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First €37,000 @ 20%Balance @ 42%
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Married couple (bothspouses with income)
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First €37,000 (with increase of €19,000 maximum*) @ 20%Balance @ 42%
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*The standard rate band (€37,000 @ 20%) can be increased by the lower of €19,000 or the amount of the income of the spouse with the lowest income. The increase in the rate band is not transferable between spouses.
b) the rate of PRSI (Class A1) for 2002 is 4% and is payable on all earnings up to a ceiling of €38,740. The first €127 per week is not chargeable to PRSI. Employees earning less than €287 per week are completely exempt from PRSI.
c) the Health Contribution for 2002 is 2% and is payable where earnings exceed €356 per week.
d) a Home Carers Tax Credit of €770 can be claimed by married persons who are jointly assessed to tax and where one spouse works at home to care for a dependent person (which includes a dependent child) provided certain conditions are satisfied. A married couple cannot claim both the Home Carer's Tax Credit and the increased standard rate band. They can, however, claim whichever of the two is the most beneficial. The Home Carers Tax Credit is not due where the home caring spouse's income exceeds €6,620
The following examples show the income tax, PRSI and levies payable by the different categories of families referred to by the Deputy on a gross income of €56,000 for the current tax year. The examples are based on the assumption that the married couple are jointly assessed for tax purposes and, where relevant, are entitled to the Home Carers Tax Credit. It is also assumed that all earners are on full rate PRSI.
Example 1
One Income Family with no dependent children.
Gross Income
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€56,000
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Band Available
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€37,000
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Band Utilised
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€37,000
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Tax
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€37,000 @ 20% = €7,400
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€19,000 @ 42% = €7,980
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Gross Tax Due
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€15,380
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Less Tax Credits
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Personal Tax Credit (€3,040)
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Employee Tax Credit (€660)
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Net Tax Due
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€11,680
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PRSI€38,740 *52 = 36 weeks (Number of weeks PRSI is liable)
€56,000
PRSI due €38,740 – (€127 × 36) × 4% =
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€1,367
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Health Contribution due €56,000 @ 2% =
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€1,120
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Total liability Tax, PRSI and Health Contribution
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€14,167
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Example 2
One Income Family with dependent children
Gross Income
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€56,000
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Band Available
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€37,000
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Band Utilised
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€37,000
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|
|
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Tax
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€37,000 @ 20% = €7,400
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|
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€19,000 @ 42% = €7,980
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Gross Tax Due
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€15,380
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Less Tax Credits
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Personal Tax Credit (€3,040)
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Employee Tax Credit (€660)
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Home Carers Tax Credit € 770
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Net Tax Due
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€10,910
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PRSI€38,740 ×52 = 36 weeks (Number of weeks PRSI is liable)
€56,000
PRSI due €38,740 – (€127 × 36) × 4% =
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€1,367
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Health Contribution due €56,000 @ 2%
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€1,120
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Total Liability Tax, PRSI and Health Contribution
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€13,397
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Example 3
Two Income Family with no dependent children. Husband Earnings €48,000; Wife's earnings €8,000.
Joint Income
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€56,000
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Spouses Income
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€48,000
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€8,000
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Band Available
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€37,000
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€19,000
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Band Utilised
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€37,000
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€8,000
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Tax liability
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€7,400 (€37,000 @ 20%)
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€1,600 (€8,000 @ 20%)
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€4,620(€11,000 @ 42%)
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€12,020
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€1,600
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Gross Tax Due
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€13,620
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Less Tax Credits
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(€2,100) personal credit (or portion thereof)
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(€940)
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(€660) employee credit
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(€660)
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(€2,760)
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(€1,600)
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= total credits
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(€4,360)
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Net Tax Due
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€9,260
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Husband PRSI
€38,740 × 52 = 42 weeks PRSI is liable
€48,000
PRSI due €38,740 – (€127 × 42) × 4% =
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€1,336.24
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Health Contribution due €48,000 @ 2% =
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€960.00
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WifePRSI due
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Nil
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Health Contribution due
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Nil
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Total liability Tax, PRSI and Health Contribution due for husband and wife
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€11,556.24
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Example 4
Two Income Family with dependent children. Husband's earnings €48,000; Wife's earnings from part-time employment –€8,000.
Joint Income
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€56,000
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Spouses Income
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€48,000
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€8,000
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Band Available
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€37,000
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€19,000
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Band Utilised
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€37,000
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€8,000
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Tax liability
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€7,400 (€37,000 @ 20%)
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€1,600 (€8,000 @ 20%)
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€4,620 (€11,000 @ 42%)
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€12,020
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€1,600
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Gross Tax Due
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€13,620
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Less Tax Credits
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|
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(€2,100) personal credit (or portion thereof)
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(€940)
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(€660)employee credit
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(€660)
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(€2,760)
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(€1,600)
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= total credits
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(€4,360)
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|
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Net Tax Due
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€9,260
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Husband PRSI
€38,740 × 52 = 42 weeks PRSI is liable
€48,000
PRSI due €38,740 – (€127 × 42) × 4% =
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€1,336.24
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Wife
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Nil
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Health Contribution
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Husband €48,000 x 2%
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€ 960.00
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Wife
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Nil
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Total Liability Tax, PRSI and Health Contribution €11,556.24
for husband and wife.
[The Home Carers Tax Credit is not due as the wife's income is in excess of €6,620].
Example 5
Two Income Family with dependent children. Husband's earnings €52,000; Wife's earnings from part-time employment –€4,000.
Joint Income
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€56,000
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Spouses Income
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€48,000
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€4,000
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Band Available
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€37,000
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€19,000
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Band Utilised
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€37,000
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€4,000
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Tax liability
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€7,400 (€37,000 @ 20%)
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€800 (€4,000 @ 20%)
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€ 6,300 (€15,000 @ 42%)
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€13,700
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€800
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Gross Tax Due
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€14,500
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Less Tax Credits
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(€2,900) personal credit (or portion thereof)
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(€140)
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(€660) employee credit
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(€660)
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(€3,560)
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(€800)
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= total credits
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(€4,360)
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Net Tax Due
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€10,140
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PRSI
Husband€38,740 × 52 = 39 weeks
€52,000
PRSI due €38,740 – (€127 × 39) × 4%
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€1,351.48
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Wife
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Nil
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Health Contribution
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Husband €52,000 x 2%
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€1,040
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Wife
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Nil
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Total Liability Tax, PRSI and Health Contribution €12,531.48 for husband and wife.
It is more beneficial in this case for the couple to claim the increased standard rate band rather than the Home Carers Tax Credit. The increased standard rate band benefits the couple by €4,000 @ 22% = €880 whereas the Home Carers Tax Credit would benefit them by €770.
Example 6
Two Income Family with dependent children. Husband's earnings €52,700; Wife's earnings from part-time employment –€3,300
Joint Income
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€56,000
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Band Available
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€37,000
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Band Utilised
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€37,000
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|
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Tax Liability
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€7,400 (€37,000 @ 20%)
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€7,980 (€15,700 @ 42%)
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Gross Tax Due
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€15,380
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Less Tax Credits
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(€3,040) married credit
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(€1,320) two employee credits of €660
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(€770) Home Carers Tax Credit
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Net Tax Due
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€10,250
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PRSI
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Husband
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€38,740*52 = 39 weeks
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€52,700
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PRSI due
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€38,740 – (€127 × 39) × 4%
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€1,351.48
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|
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Wife
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Nil
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Health Contribution
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Husband €52,700 x 2%
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€1,054
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Wife
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Nil
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Total Liability Tax PRSI and Health Contribution €12,655.48 for husband and wife.
It is more beneficial in this case for the couple to claim the Home Carers Tax Credit band rather than the increased standard rate band. The Home Carers Tax Credit benefits the couple by €770 whereas the increased standard rate band would benefit them by €3,300 @ 22% = €726.
Example 7
Two Income Family with no dependent children. Husband's Earnings €28,000; Wife's earnings €28,000.
Joint Income
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€56,000
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Spouses Income
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€28,000
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€28,000
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Band Available
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€28,000
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€28,000
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Band Utilised
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€28,000
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€28,000
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Tax liability
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€5,600 (€28,000 @ 20%)
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€5,600 (€28,000 @ 20%)
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Gross Tax Due
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€11,200
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Less Tax Credits
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(€1,520) personal credit
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(€1,520)
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(€660) employee credit
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(€660)
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(€2,180)
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(€2,180)
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= total credits
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(€4,360)
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Net Tax Due
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€6,840
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PRSI due each for husband and wife (€28,000 –€6604 @ 4%) €855.84 x 2 = €1,711.68
Health Contribution due each for husband and wife (€28,000 @ 2%) €560.00 x 2 = €1,120
Total Liability Tax PRSI and Health Contribution €9,671.68 for husband and wife.