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Earned Income Credit

The Earned Income Credit is available since 1 January 2016. It is allowed in respect of the pay that you earn. It is a separate credit to the Employee Tax Credit in that it can also be claimed by people who are self-employed.

Examples of income that qualifies for the earned income credit includes:

  • trading income (Case I and II)
  • and
  • pay earned by proprietary directors.

The credit is not available against your passive or investment income, such as:

  • rental income
  • or
  • deposit interest income.

The credit available is the lower of:

  • €1,500
  • or
  • 20% of your qualifying earned income.

You may have income that qualifies for the Employee Tax Credit and the Earned Income Tax Credit. If so, the combined value of these credits cannot exceed the maximum value of the Employee Tax Credit.

This credit cannot be transferred to your spouse or civil partner.

How to claim

Log into myAccount to claim this credit or complete a Form 11. After logging into myAccount select:

  • PAYE services
  • Manage your tax 2020
  • Add new credits.

Note

The Earned Income Credit will be available to claim if you are registered as:
- a proprietary director
- a spouse or civil partner of a proprietary director
- a child of proprietary director
- being in receipt of trading profit or other foreign income.

Examples

  • Example 1

    Joe is a non-proprietary director and earns €50,000 per year. This is his sole source of income.

    As the earnings are relieved by way of the Employee (PAYE) Tax Credit, the Earned Income Tax Credit is not available.

  • Example 2

    Beth has a PAYE pension of €5,000 and Case I income of €2,000 for 2020. What credits is she entitled to?

    Employee (PAYE) Tax Credit
    €5,000 x 20% = €1,000

    Earned Income Tax Credit
    €2,000 x 20% = €400

    The combined tax credits are €1,400, which is less than the Employee Tax Credit. As such there is no restriction on the Earned Income Tax Credit.

  • Example 3

    Karen and John are jointly assessed.

    Karen is the assessable spouse, she has Case I income of €50,000 in 2020. John has Case II income of €2,500 for the same period.

    Karen is due two Earned Income Tax Credits, calculated as follows:

    Karen's income: €50,000 x 20% = €10,000
    Maximum Earned Income Tax Credit available = €1,500

    John’s income: €2,500 x 20% = €500

    The combined Earned Income Credits available under joint assessment for 2020 are €2,000 (€1,500 + €500).

Published: 01 January 2020 Print this page

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