Care Based Allowances

Table of Contents

Credits & Allowances

The effect of tax credits is that relief is only available at the standard rate. Formerly there was a system of allowances by which the amount of allowances was deducted from taxable income. Some allowances are still available.

The effect of allowances is that individuals who pay tax at the marginal rate receive proportionately more benefits, That is because this is because the allowance reduces taxable income and effectively reduces tax at the highest rate.

There are still some reliefs that are available at the marginal rate. These are effectively deducted before calculating taxable income.

Dependent Relative Tax Credit

A dependent relative tax credit of €80 is available, provided that the person concerned does not have income which exceeds the maximum old age contributory pension (no dependents over 80 years rate) by more than €280.

The dependent person must reside with the married claimants, together or in a neighbouring residence within 2 km, provided there is a direct communication link. A “dependent person” does not include a spouse.

If the home carer has income less than €5,080 per annum, a full tax credit may be claimed. Income does not include the social welfare carer’s allowance. There is a tapering of the allowance where the carer’s s income is between €5080 and €6880.

If the home carer’s allowance is granted in one year and the home carer’s income exceeds the limit for the following year, the credit will still be available, provided that the other conditions are met and the credit was available for the immediately preceding year. This is subject to a limit of the amount granted for the previous year.

Child Carer Credit

The Finance (No.2) Act 2013 provides a new credit named a single person child carer credit. This replaces the one parent family tax credit. Unlike the previous one parent family tax credit, the single person child carer credit only applies where the qualifying child is resident for the whole or most of the year of assessment.

A home carer is entitled to a tax credit of up to €1650. This credit is an alternative to the increased married person’s standard rate band of 20%.

A home carer’s tax credit is available to a married couple who are jointly assessed to tax, where the home carer cares for one or more dependent persons. A dependent person is

a child for whom a child benefit is payable, being a child under 16
a child in full-time education under 19;
a person over 65 years; or
a person permanently incapacitated by mental or physical infirmity.

The dependent must usually reside with the couple. A relative may live within 2 km further, where there is a direct system of communication between the properties. If the home carer has an income of more than €5,080, part of the payment is disallowed. I it is reduces to nil, if the home carer has income of €7,200 or more..

A single person who cares for a qualifying child is entitled to a tax credit of €1650. The credit is an alternative to the married person’s tax credit. Both cannot be claimed at once.

Qualifying Child

A qualifying child is one

under 18 years, or in full-time education over 18 years
Permanently incapacitated under 18 while in full-time education
the child of the claimant

in the custody of the claimant who maintains the child for the whole of the greater part of the tax year.

The credit can be claimed by one spouse only for the child concerned. One parent may surrender the entitlement to the other provided they both satisfy the conditions and are entitled to the credits in their own right.

If the primary claimant surrenders the credit to the secondary claimant the child must reside with the secondary claimant at least 100 days a year. A declaration must be completed by each of the primary claimant and secondary claimant.

The credit is not available to a person, whether a primary or secondary claimant, who is cohabiting, whether married or otherwise. Where the secondary claimant relies on the primary claimant’s qualifications, the primary claimant must not be cohabiting. It is not possible to surrender the credit for one child while maintaining it in for another.

An individual taken care of an incapacitated child of his or of his spouse is entitled to a credit of €3,300.The child’s income is ignored.

Incapacitated Child

A tax credit of €3,660 is available for each qualifying incapacitated child. The child must be under 18 and be permanently incapacitated by reason of mental or physical infirmity. He may be over that age if he has been incapacitated before the age of 21 or while or over 21 and in full-time education or in training at the time he became permanently incapacitated.

The child must be

under 18 years old and permanently incapacitated due to a mental or physical condition.
Over 18 years unable to maintain himself due to such condition, which commenced when he or she was under 18 years or over 18 years in full-time education.

The credit cannot be claimed at the same time as the credit for employing a carer. It can be claimed in conjunction with the home carer’s tax credit.

Taking Care of Relative

There is a tax credit where a person maintains a relative at his expense provided that the relatives income does not exceed €15,740 per annum.

There is a tax credit for a person who maintains

an incapacitated relative of his or his spouse
his or his spouse’s widowed parent whether incapacitated or not; or
a son or daughter who lives with him on whose services he is compelled to depend on by reason of old age or infirmity.

He is entitled to a tax credit of €80. This is provided that the income of the person for whom the claim is made does not exceed €280 p/w, the age-old contributory pension for a person over 80 years old, with no dependents subject to certain assumptions. It is allowed at a marginal rate.

Employing a Carer

There is an allowance where a person is employed to take care of an incapacitated individual. Accordingly it is available at the marginal rate.

The latter person must be a relative who is totally incapacitated owing to physical or mental infirmity. Where persons are jointly assessed, the allowance also applies to a relative of a spouse. The amount of the allowance is the amount actually paid or €75,000, whichever is lower.

The taxpayer does not need to employ the carer in the employment sense. It is sufficient that the cost of care is paid by the relatives concerned.

Incapacitated Person

The incapacitated person may be the taxpayer or his spouse, or a relative or either of them. It includes a person in respect of whom the individual is a guardian. Relief is granted at the marginal rate. Where the relief is claimed, the incapacitated child tax credit or dependent relative tax credit is not available.

The person may be incapacitated for physical or mental reasons. He or she must be incapacitated during the whole of the relevant tax year, although this has been eased for the first year.

Relief

The relief is the lower of €75,000 per annum or the actual cost to the taxpayer of employing the carer. Where two or more persons claim the credit, the aggregate of €75,000 is apportioned in proportion to the amount of cost they bear.

Where several persons contribute towards the cost of the carer, the credit is apportioned between them. Commonly a number of relatives may contribute, in which case, the allowance is shared. The aggregate allowance may not exceed €75,000 and is apportioned relative to the expenses borne by each person. The allowance is commonly availed of by children paying for the care of incapacitated parents or other relatives.

The maximum relief available in employing a person directly or indirectly through an agent to take care of certain related and qualifying individuals, who were incapacitated by physical or mental incapacity, was increased to €75,000 from €50,000 by Finance Act 2014.