If you are a single parent, you are entitled to claim an extra tax credit known as the One-Parent Family Tax Credit. The one-parent family tax credit is worth €1,650 in 2012. This will allow you to earn an extra €8,250 free of income tax. (Unfortunately it will not reduce the amount of PRSI or USC that you pay as all tax credits only impact on your income tax liability).
Who qualifies for the one-parent family tax credit?
The one-parent family tax credit can be claimed if you are a single parent and you have a child, under the age of 18, who is dependent on you and resides with you for at least one night in the year.
In addition to children aged 18 or under, you can also receive this for a child over the age of 18 who is in full time education or undergoing a full time training course for a trade or profession for a minimum of two years.
You can also receive this tax credit if you are a single parent to a child who is permanently physically or mentally incapacitated and has become so before reaching 21 years of age, or has become permanently incapacitated after reaching 21 but whilst in full time education.
You do not qualify for one-parent family tax credit if:
• You are a person qualifying for the married person's tax credit or
• You are a person living together with another person as man and wife
Note that if you are claiming this tax credit and at a later date move in with a partner, you are no longer entitled to this credit and must inform Revenue.
And the tax savings get better....
If you claim the one-parent family tax credit, you will also receive an increase in your standard rate band. This means that the amount you are allowed to earn at the 20% tax rate will increase. As a single person you are entitled to earn up to €32,800 at 20%. When you claim the one-parent family tax credit, as well as receiving the tax credit your 20% tax band will increase from €32,800 to €36,800. This means you can earn an extra €4,000 which is only taxed at 20% instead of 41%. This is a tax saving of €840. (Please note that this information is based on the 2012 tax rates).
Social Welfare payments to single parents
Claiming the one-parent family tax credit will not affect your entitlement to the One Parent Family Payment from the Department of Social and Protection if you are in receipt of same. However don’t forget that the One Parent Family Payment is a taxable source of income and the tax due on this payment is collected by means of an adjustment to your tax credit certificate. It is advisable to make sure that Revenue is aware that you are in receipt of this payment in order that they can adjust your tax credits accordingly. If you do not, you may find yourself with an unexpected tax bill at a later stage when or if Revenue contacts you about this.
How to claim this tax credit
You can claim this tax credit by sending in Form OP1 to Revenue. You will find a link to this form below.
Alternatively you can claim using PAYE Anytime. If you are not registered for PAYE Anytime, you can do so here: http://www.ros.ie/paye/launchPAYEanytime_en.html
If you have any questions or need advice, don’t hesitate to contact Fenero on firstname.lastname@example.org or 01-6877400.