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Dáil Éireann díospóireacht -
Thursday, 7 Mar 2002

Vol. 550 No. 2

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)

First €37,000 @ 20%Balance @ 42%

Married couple (bothspouses with income)

First €37,000 (with increase of €19,000 maximum*) @ 20%Balance @ 42%

*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

€56,000

Band Available

€37,000

Band Utilised

€37,000

Tax

€37,000 @ 20% = €7,400

€19,000 @ 42% = €7,980

Gross Tax Due

€15,380

Less Tax Credits

Personal Tax Credit (€3,040)

Employee Tax Credit (€660)

Net Tax Due

€11,680

PRSI€38,740 *52 = 36 weeks (Number of weeks PRSI is liable)
€56,000

PRSI due €38,740 – (€127 × 36) × 4% =

€1,367

Health Contribution due €56,000 @ 2% =

€1,120

Total liability Tax, PRSI and Health Contribution

€14,167

Example 2
One Income Family with dependent children

Gross Income

€56,000

Band Available

€37,000

Band Utilised

€37,000

Tax

€37,000 @ 20% = €7,400

€19,000 @ 42% = €7,980

Gross Tax Due

€15,380

Less Tax Credits

Personal Tax Credit (€3,040)

Employee Tax Credit (€660)

Home Carers Tax Credit € 770

Net Tax Due

€10,910

PRSI€38,740 ×52 = 36 weeks (Number of weeks PRSI is liable)
€56,000

PRSI due €38,740 – (€127 × 36) × 4% =

€1,367

Health Contribution due €56,000 @ 2%

€1,120

Total Liability Tax, PRSI and Health Contribution

€13,397

Example 3
Two Income Family with no dependent children. Husband Earnings €48,000; Wife's earnings €8,000.

Joint Income

€56,000

Spouses Income

€48,000

€8,000

Band Available

€37,000

€19,000

Band Utilised

€37,000

€8,000

Tax liability

€7,400 (€37,000 @ 20%)

€1,600 (€8,000 @ 20%)

€4,620(€11,000 @ 42%)

€12,020

€1,600

Gross Tax Due

€13,620

Less Tax Credits

(€2,100) personal credit (or portion thereof)

(€940)

(€660) employee credit

(€660)

(€2,760)

(€1,600)

= total credits

(€4,360)

Net Tax Due

€9,260

Husband PRSI
€38,740 × 52 = 42 weeks PRSI is liable
€48,000

PRSI due €38,740 – (€127 × 42) × 4% =

€1,336.24

Health Contribution due €48,000 @ 2% =

€960.00

WifePRSI due

Nil

Health Contribution due

Nil

Total liability Tax, PRSI and Health Contribution due for husband and wife

€11,556.24

Example 4
Two Income Family with dependent children. Husband's earnings €48,000; Wife's earnings from part-time employment –€8,000.

Joint Income

€56,000

Spouses Income

€48,000

€8,000

Band Available

€37,000

€19,000

Band Utilised

€37,000

€8,000

Tax liability

€7,400 (€37,000 @ 20%)

€1,600 (€8,000 @ 20%)

€4,620 (€11,000 @ 42%)

€12,020

€1,600

Gross Tax Due

€13,620

Less Tax Credits

(€2,100) personal credit (or portion thereof)

(€940)

(€660)employee credit

(€660)

(€2,760)

(€1,600)

= total credits

(€4,360)

Net Tax Due

€9,260

Husband PRSI
€38,740 × 52 = 42 weeks PRSI is liable
€48,000

PRSI due €38,740 – (€127 × 42) × 4% =

€1,336.24

Wife

Nil

Health Contribution

Husband €48,000 x 2%

€ 960.00

Wife

Nil

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

€56,000

Spouses Income

€48,000

€4,000

Band Available

€37,000

€19,000

Band Utilised

€37,000

€4,000

Tax liability

€7,400 (€37,000 @ 20%)

€800 (€4,000 @ 20%)

€ 6,300 (€15,000 @ 42%)

€13,700

€800

Gross Tax Due

€14,500

Less Tax Credits

(€2,900) personal credit (or portion thereof)

(€140)

(€660) employee credit

(€660)

(€3,560)

(€800)

= total credits

(€4,360)

Net Tax Due

€10,140

PRSI
Husband€38,740 × 52 = 39 weeks
€52,000

PRSI due €38,740 – (€127 × 39) × 4%

€1,351.48

Wife

Nil

Health Contribution

Husband €52,000 x 2%

€1,040

Wife

Nil

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

€56,000

Band Available

€37,000

Band Utilised

€37,000

Tax Liability

€7,400 (€37,000 @ 20%)

€7,980 (€15,700 @ 42%)

Gross Tax Due

€15,380

Less Tax Credits

(€3,040) married credit

(€1,320) two employee credits of €660

(€770) Home Carers Tax Credit

Net Tax Due

€10,250

PRSI

Husband

€38,740*52 = 39 weeks

€52,700

PRSI due

€38,740 – (€127 × 39) × 4%

€1,351.48

Wife

Nil

Health Contribution

Husband €52,700 x 2%

€1,054

Wife

Nil

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

€56,000

Spouses Income

€28,000

€28,000

Band Available

€28,000

€28,000

Band Utilised

€28,000

€28,000

Tax liability

€5,600 (€28,000 @ 20%)

€5,600 (€28,000 @ 20%)

Gross Tax Due

€11,200

Less Tax Credits

(€1,520) personal credit

(€1,520)

(€660) employee credit

(€660)

(€2,180)

(€2,180)

= total credits

(€4,360)

Net Tax Due

€6,840

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.
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