Revenue Tax Briefing

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Revenue Tax Briefing Issue 59, April 2005

Incapacitated Individual Deduction

Employed Person Taking Care of an Incapacitated Individual

Introduction

Section 467 TCA 1997 provides for a tax deduction at the individual’s highest rate of tax in respect of the costs incurred by an individual of employing another person (including a person whose services are provided by or through an agency) to take care of him/herself, a spouse or a relative who, throughout the relevant tax year, is totally incapacitated by reason of physical or mental infirmity.

Revised Procedures

While the words “throughout the year of assessment” prohibit the claiming of the allowance for the year during which the individual became totally incapacitated, with effect from 1 January 2004, relief may be allowed for the tax year during which the individual became totally incapacitated. The deduction for such tax year will be the lower of either

  1. The actual cost incurred, or
  2. The maximum deduction of €30,000 as apportioned by reference to the number of months during which the individual was permanently incapacitated in the commencement year.

Example

Mrs. A. has employed at a cost of €3,000 per month, a person to take care of her incapacitated husband who became totally incapacitated on 1 May 2004. The tax deduction due for 2004 will be the lower of

  1. The actual cost incurred [i.e. €3,000 × 8 months = €24,000], or
  2. The maximum deduction of €30,000 as apportioned by reference to the number of months during which the individual was permanently incapacitated [i.e. €30,000 × 8/12ths = €20,000]

In this example, the tax deduction due is €20,000 @ the taxpayer’s marginal rate of tax.