I am grateful to the Deputy for clarification that this question relates to the basis and rationale behind the restriction which may preclude a dual income couple from claiming both the home carer credit and the increased standard rate cut-off point available for such couples.
The home carer credit was introduced in Finance Act 2001 in tandem with the move towards individualisation of the income tax system in order to maintain some support for families where one spouse works primarily in the home to care for children or other dependants and therefore is not able to fully participate in the labour force.
Section 466A of the Taxes Consolidation Act, 1997 sets out the conditions for the availably of the relief.
As per subsection (6), to provide additional flexibility to lower-income families who may need some supplementary income from a second earner, if the home carer works part-time and earns some income in their own right, they may earn up to €7,200 per year without full entitlement to the credit being withdrawn. The credit is progressively withdrawn once income exceeds this threshold limit by €1 for every additional €2 of income earned so that a home carer earning between €7,200 and €10,200 may be entitled to a partial credit and no credit at all available once income exceeds €10,200.
In such circumstances, as per subsection (8), the family has the choice of claiming the more beneficial of either the Home Carer Credit or the ‘increased standard rate band for two-income couples’ which they are entitled to as two earners are each in receipt of income. Revenue will automatically apply the most beneficial option for the family.
This option arises because of the interaction between the home carer credit and the standard rate cut off point for one income couples, as once the primary earner’s income exceeds around €37,000 the net benefit of the credit begins to reduce, until the primary earner’s income reaches €44,600 and the benefit of the home carer credit additional income threshold is exhausted. If the family’s income is over this amount, it is less beneficial for the couple to claim the Home Carer Credit than the increased rate band for dual income couples which they are entitled to as both spouses are in receipt of income.
The question of choosing between the Home Carer Credit and the increased rate band is therefore relevant only where the primary earner’s income is high enough to fully use the maximum available rate band (that is, €44,300) and therefore the home carer’s income limit is of specific benefit to lower-income families with dual incomes.