With effect from 2016 and future years the Home Carer Tax Credit has been increased to €1,000. Previously this has been running at €810 a year.
In addition the income limit for the carer has been increased to €7,200 from €5,080. Once this limit is exceeded then the amount of tax credit due is tapered downwards. Once income for the carer has exceeded €9,200 (€6,700 in previous years) then no tax credit is due.
What is the Home Carer tax credit?
The Home Carer tax credit can be claimed by married couples or couples in a civil partnership where one spouse or civil partner cares for one or more dependent persons. The tax credit is assessed as a single amount regardless of the number of dependent persons.
How Do I Qualify For The Credit?
Firstly the couple must be jointly assessed for income tax. It doesn’t apply where couples are being taxed as single people. Clearly there are other factors involved when making a decision to be taxed as a couple or as a single person. So it is important to consider your entire tax position before changing your basis of income tax assessment.
The carer must be caring for a dependent person. This would include:
- A child for whom Department of Social Protection Child Benefit is payable;
- A person aged 65 or older; or
- A person who is permanently incapacitated because of mental or physical infirmity.
For employees working in Ireland on short term assignments they generally remain within the social security system of their home country. So they may not receive Child Benefit from the Department of Social Protection. However, the Revenue have said that they will consider the child to meet the conditions if the claimant receives a similar type of payment in their home country.
Unfortunately, the other spouse or civil partner cannot be considered a dependent person for the purpose of claiming this tax credit.
Generally the dependent person must reside with the couple for the tax year. However, there is an exception for relatives who can be cared for outside the home. There are limits to this. Firstly, they need to live next door in a neighbouring residence, or on the same property, or within 2 kilometres of the couple. Secondly, there must be a direct communication link, such as a telephone or alarm system, between the two homes.
Interaction With Other Aspects of Tax
It is not possible for a couple to claim both the Home Carer’s Tax Credit and the increased standard rate tax band. It is an either/or approach. However, a couple is entitled to choose whichever is the most beneficial. In fact, the Revenue have said they will automatically grant the more beneficial treatment.
As always, if you are not sure how to take best advantage of the tax credits you may be entitled to please do not hesitate to give us a call.