A complete guide to earned income tax credit in Ireland
Navigating the complexities of tax obligations can often feel daunting, especially for self-employed individuals and those earning supplementary income in Ireland. However, there’s a beacon of hope in the form of the Earned Income Tax Credit (EITC), designed to reduce some of the financial burdens for hardworking professionals. Our expert team at Tax Returns Plus is here to guide you through the essentials of the EITC, making it as accessible and understandable as possible.
This blog post aims to provide a complete overview into Ireland’s Earned Income Tax Credit – including its rates, thresholds, who it applies to and how to benefit from it.
What Is the Earned Income Tax Credit?
Earned Income Tax Credit in Ireland, is a tax relief measure aimed at reducing the tax liability for individuals earning income from their trading or business ventures. First launched in January 2016, this initiative aims to recognise the economic contribution of self-employed individuals and those outside the traditional PAYE system, offering a tangible financial incentive to bridge the gap between the taxation of self-employed and PAYE workers in Ireland.
It differs from the Employee Tax Credit as self-employed people can also claim it.
Who is Eligible for the Earned Income Tax Credit in Ireland?
Understanding who is entitled to Ireland’s earned income tax credit is crucial.
The credit supports those deriving income from:
- Trading income (Case I and II)
- Salaries earned by proprietary directors
This tax credit cannot be applied to passive income or income from investments, such as:
- Rental income
- Dividends
- Deposit interest income.
It’s important to note that the credit is designed for active income generators, ensuring those who contribute directly to their financial growth through work are the ones who benefit
What is Considered Earned Income?
Qualifying earned income includes income from wages, salaries, trading income (Class I and II of Irish tax), and certain payments received by proprietary directors (business owners).
How Much is the Earned Income Tax Credit?
Introduced in 2016, the EITC has undergone several adjustments, notably in 2018, when it was increased from €950 to €1,150. This adjustment underscores the government’s commitment to supporting self-employed individuals and ensuring a fairer tax landscape.
The current rate of Earned Income Tax Credit credit available as of 2024 is the lower of:
- €1,875
- or 20% of your qualifying earned income.
Frequently Asked Questions on EITC
Addressing common queries about the Earned Income Tax Credit can provide further clarity. Let’s explore some of the most frequently asked questions.
Can I Claim the EITC if I’m Self-Employed?
Yes! Self-employed individuals like you can claim the EITC as long as your income qualifies as “earned income” under Revenue regulations.
How to Claim Earned Income Tax Credit?
Self-employed individuals can claim the EITC at the year’s end on the Form 11 tax return, with the credit amounting to the lower of €1,875 or 20% of your qualifying earned income. You can claim the EITC through your myAccount on the Revenue website or by filing a tax return. If navigating the process seems daunting, don’t hesitate to seek help!
Can I receive the full value of both the Earned Income Tax Credit and the Employee Tax Credit?
If you qualify for both the Employee Tax Credit (previously PAYE credit) and the Earned Income Tax Credit, you can claim both. In 2024, you can claim a total of up to €1,875 via the Employee Tax Credit, Earned Income Tax Credit or a combination of both. However, the value of the credit cannot exceed a total of €1,875.00
Maximising Your EITC Benefits
For working professionals and self-employed individuals in Ireland, staying informed about the Earned Income Tax Credit and other tax reliefs is pivotal. Understanding the 2024 Budget Highlights and knowing which Tax Deductions You Can Claim can significantly impact your financial planning and tax liability.
Navigating your tax returns doesn’t have to be complicated! Resources like our guide on How to File Your Tax Returns and understanding the implications of Capital Gains Tax in Ireland are designed to support you through every step of the process.
Conclusion
The Earned Income Tax Credit represents a crucial support mechanism for Ireland’s self-employed and those earning additional Non PAYE income. At Tax Returns Plus, we’re committed to providing you with professional, insightful, and approachable guidance, empowering you to navigate the tax landscape confidently.
Whether you’re exploring the EITC for the first time or looking to deepen your understanding, we’re here to help you harness the benefits of this vital tax credit. For personalised advice and assistance with your tax returns, complete our short form now to receive a quote and find out how our team can help you with your Inheritance tax return this year.
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