Sizeable tax breaks available for home-based child minders
Farming spouses who opt to work in the home may be ideally positioned to avail of the Childcare Services Tax Exemption on earnings of up to €15,000 per annum. This option is also available to persons who are in receipt of contributory pensions, rental income or in fact income from any source including other part time employment, provided that your income is not means tested.
There is no restriction in regard to minding related children such as grandchildren, nieces or nephews and so on, so the opportunity of keeping the cost of child minding within the family may suit many farm families.
Farming spouses who are preparing farm accounts and filing tax returns on a partnership basis are not excluded as their input to the partnership may be mainly administrative or indeed their involvement in the farming enterprise may be outside their childminding hours.
The following are important points to note:
You can mind no more than three children.
The minding has to be in your own home, not the children's.
If you earn more than €15,000 you are taxable on all income received.
You are not allowed deduct any expenses so the exemption applies to gross income.
You must file an annual tax return declaring your childminding earnings or include details if you are already filing a return.
You must notify the relevant person in your local HSE office that you are childminding and claiming the tax exemption.
The childminder has to be self-employed and not an employee of the person providing the minding service.
Your income is not liable to Universal Social Charge (USC), but you may make a Class S minimum PRSI contribution which will cost you €500. This may suit some people who are seeking credits towards a Contributory Pension or indeed a person who may wish to qualify for Maternity Benefit.
Providing childminding services in your own home does not affect its status as your principal private residence whereby it qualifies for an exemption from Capital Gains Tax.
If you are currently entitled to the Home Carer's Income Tax Credit which amounts to €1,000 from January 1 next, your annual earnings cannot exceed €7,200 if you wish to retain entitlement to the full tax credit.
Employing a child minder is not tax deductible but employing a carer may be where you employ a carer for yourself or on behalf of a family member. A family member is a spouse, civil partner, child or a relative, including a relation by marriage or civil partnership.
You can employ the carer directly or you can use an agency that employs carers. If you employ the carer yourself, you should register them for tax and PRSI as an employee. You will also have other duties and obligations as an employer regarding hours of work, contracts of employment, holidays and so on.
The person being cared for must be totally incapacitated for the complete tax year in which you are claiming the tax relief but the carer does not have to be employed for the full tax year.
The term totally incapacitated means the person is disabled and requires a carer. The maximum allowed for tax purposes is €75,000.
Relief for employing a carer is allowable at your highest rate of tax. It should be noted that you cannot claim tax relief for employing a carer if the carer only carries out housekeeper duties or if a Dependent Relative Tax Credit or an Incapacitated Child Tax Credit has already been granted.
You may also claim tax relief on up to €75,000 per annum for home nursing. If you, or a family member has a serious illness and you employ a qualified nurse, you must provide the Revenue Commissioners with the name, address and qualifications of each nurse providing care.
You must also provide receipts for all payments made to the nurses and a medical certificate from doctor (either your GP or consultant) stating the nature of that illness and confirmation that constant nursing care by a qualified nurse in the patient's home is required.
Nursing Home Care
The cost of nursing home care is allowable in full against income tax at your marginal rate regardless of whether the cost of care is for yourself or another person.
There is no limit to the amount you can claim. For high rate tax payers, this reduces the cost of nursing home care by 40pc.
Martin O'Sullivan is the author of the ACA Farmers Handbook. He is a partner in O'Sullivan Malone and Company, Accountants and Registered Auditors. www.som.ie. Ph: 051 640397
Tax exemptions can make child-minding an attractive earning option for some farm spouses
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