Revenue Note for Guidance

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Revenue Note for Guidance

472AB Earned Income Tax Credit

Summary

An Earned Income tax credit is available to individuals in receipt of earned income (other than income that qualifies for the Employee (PAYE) tax credit). The amount of the tax credit is €1,650 or 20 per cent of the emoluments, whichever is the lesser. However, the combined Earned Income tax credit and Employee (PAYE) tax credit (s. 472), in relation to an individual, cannot exceed €1,650.

In the case of a married couple or civil partners, both of whom have income, each spouse or civil partner is entitled to a separate tax credit.

Details

Definitions

(1) ““appropriate percentage”” is a percentage equal to the standard rate of income tax for a year of assessment.

““qualifying earned income”” means earned income (as defined in S. 3) but does not include income that is used in determining the Employee (PAYE) tax credit (s.472).

Relief

(2) This subsection deals with the determination of the tax credit due.

Paragraph (a) provides that the credit due to an individual in respect of his or her own income is the lower of €1,650 and the appropriate percentage (currently 20%) of the qualifying earned income, and

Paragraph (b) provides that, where the individual is assessed under joint assessment in respect of his or her spouse’’s or civil partners income, the credit due to the assessable spouse is computed on the income of his or her spouse or civil partner and is the lower of €1,650 and the appropriate percentage (currently 20%) of the qualifying earned income of his or her spouse or civil partner.

Interaction with Employee (PAYE)Tax Credit

(3) Paragraph (a) provides, in relation to an individual’’s own income, that the aggregate of the tax credit under this section and any Employee (PAYE) tax credit is not to exceed €€1,650, and

Paragraph (b) provides, in relation to the income of the individual’’s spouse or civil partner on which the individual is assessable under joint assessment, that the aggregate of the tax credit under this section and any Employee (PAYE) tax credit due in respect of the income of the individual’’s spouse or civil partner is not to exceed €1,650.

Relevant Date: Finance Act 2020