This tax credit was introduced to provide a measure of compensation to married couples where one spouse remains at home to look after family members in view of the increased 20% tax rate band for dual income couples.
The tax credit is €1600 for 2020 & 2021. This tax credit must be claimed from the Revenue. In practice people often overlook this claim so it is worth checking to ensure that you are being allowed the benefit.
Where the home carer has other income a calculation needs to be done to see which is more beneficial i.e. the €1,600 tax credit or the increased 20% tax rate band.
If the home carer earns income of up to €7,200 during the tax year, the full tax credit may be claimed.
When the income exceeds €7,200, the tax credit is reduced by one half of the income of the home carer that exceeds this limit.
The spouse (the ‘home carer’) who works in the home must be looking after one or more dependent persons, i.e., a child for whom they are entitled to Social Welfare child benefit, a person aged 65 or over, or a person who is permanently incapacitated by reason of mental or physical infirmity and the qualifying person normally resides with the couple for the year.
The tax credit is not available to married couples that are taxed as single persons.