There’s been a bit of chatter around tax and the Maternity Benefit over the last week, so I thought it might help all the new mums out there to have someone clarify the situation for you. I know with me, it was the last thing I wanted to think about when I had a newborn at home, but it really can pay to know what to expect from your Maternity Benefit and if there’s any other Tax Credits in the pot you can claim.
I was reading an article over the weekend by Louise McBride in the Sunday Independent, where she rightly points out that maternity benefit, as with some other social welfare payments, is a taxable source of income from 1st July 2013. This means the payment is added to your employment income to give the total taxable income for PAYE.
For example, take a married couple:
His salary €35,000
Her salary €23,000 + €5,980 Maternity Benefit = €28,980
Total taxable income €63,980
Many of our customers are often shocked to discover this relatively new tax!
The rate of tax you’ll pay depends on how much income you earn in addition to your maternity benefit, as Social Welfare does not deduct tax at the source. This means you will pay more tax on your regular income and still receive the weekly full-rate benefit of €230.
But do not despair! There are tax credits available that you can claim to reduce your tax burden and allow you to focus on your new baby.
Along with the usual tax credits like rent and tuition fees, new mums could be eligible for the following tax credits:
1. Medical Expenses
Did you have any out-of-pocket expenses during your pregnancy? New mums can claim back 20% of the cost of all GP and hospital visits, provided they have not been reimbursed or covered by medical insurance or medical cards. You can also claim back the cost of GP prescribed medications and IVF treatment. And the great part is that there is no upper limit for these expenses!
2. One Parent Family
If you are a single mum and not living with a partner, you could be eligible for the One Parent Family Tax Credit (now known as the Single Person Child Carer credit). This entitles you to an extra tax credit of €1650 per year to help towards the cost of going-it on your own.
3. Home Carers Tax Credit
For married couples, if one spouse is staying at home to care for the child/ren and your taxes are jointly assessed, you could be eligible for the Home Carers Tax Credit which is worth €810 per year. It’s even possible for the Home Carer to earn a small income of up to €5,080 per year without impacting on the tax credit.
4. Widowed Parent Tax Credit
In the unfortunate event of the death of a spouse, the widowed parent tax credit can help ease the financial burden on your family. This credit can be claimed for 5 years after the death of a spouse as long you are living with your child/ren and provided you have not remarried or are not living with a partner. There is also an additional credit for a widowed person, and those with children may be eligible to claim both.
With a newborn at home, I know tax is the last thing you want to think about – but it can make quite an impact at a very expensive time. Here at Red Oak, we take the hassle out of looking into your taxes – all you have to do is complete our 1 page Application Form and hand it over to us.
To check if you could be due a refund, apply now!
Written by Grainne Lyng
I’m the Tax Manager at Red Oak. With a Master’s in Business under my belt and being a qualified accountant, I get a kick out of knowing everything there is to know about tax. I love getting into the nitty-gritty legalities to make sure we get our customers the best refund we can!