Dáil Éireann díospóireacht -
Tuesday, 26 Mar 2002

Vol. 551 No. 2

Written Answers. - Tax Allowances.

Enda Kenny

Ceist:

218 Mr. Kenny asked the Minister for Finance if the home maker's allowance for stay-at-home spouses, to be paid at full old age non-contributory pension rates, will be used as a taxable base for another income in the household; and if he will make a statement on the matter. [10101/02]

Minister for Finance (Mr. McCreevy)

I presume the Deputy is referring to the home carer's tax credit, which was an allowance when introduced and is now a credit. I introduced it in the Finance Act, 2000, and it is designed 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. 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 dependants in the home. However, there is an income disregard, whereby the home carer may have some income in their own right without affecting his or her 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. There is no income test in relation to the person being cared for.

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. For example, if the income of the carer is €5,850, a reduced tax credit of €385 applies. Carer's benefit and carer's allowance, payable under the Social Welfare Acts, are disregarded for determining entitlement to the home carer's tax credit. The maximum rate of old age non-contributory pension is currently €134 per week, that is €6,992 per annum, which exceeds the maximum level of income set out above though reduced levels of pension might fall within income ranges which could qualify.