Tax Credit (Persons Returning to Employment) Rules

It applies in 3 specific situations:

1. An individual (below retirement age) who returns to employment on or after 1 January 2008, has been absent from all paid work for at least 5 consecutive years before returning, was not listed on the Jobsplus unemployment register during those 5 years, has never received a pension based on previous employment and previously worked for at least 24 consecutive months.
2. A woman who has a child or children under 16, returns to employment on or after 1 January 2008, has been absent from all paid work for at least 5 consecutive years before returning.
3. A woman who, has a child or children born on or after 1 January 2007; and either continues employment or returns to employment on or after 1 January 2007. 

Any person who satisfies these conditions shall be entitled to:

➡️ A tax credit of €2,000

This tax credit is set off against the tax due on income from that employment. 

If eligibility arises under Situation 2 or Situation 3 (i.e, woman continues or returns to employment with children born on/after 1 January 2007 or a woman returns to work after a 5‑year break with children under 16 then:

➡️ The woman is entitled to a separate €2,000 tax credit for every child.

Conditions:

• The tax credit can only be used to reduce tax on employment income earned after returning to work and it may be used over two consecutive years of assessment, starting from the year in which the person returns to employment.  It cannot be used to offset tax on any other sources of income.
• In the case of women falling under Situation 2 and 3:   The tax credit may be spread over a number of consecutive years, up to a maximum of: (number of children + 1 years). The credit may not exceed €2,000 in any one year.
• The income on which the tax credit is granted is treated as the first portion of that person’s total income for the relevant year of assessment.

Alternative option:

• A woman who qualifies under Situations 2 or 3 may choose a different tax credit equal to the tax she pays on her employment income in the year she returns to work, up to €5,000 per child. If she has more than one eligible child, the credit is used in consecutive years. This option once chosen is irrevocable.

In the case of adoption:

• Situation 2 and 3 also apply in cases of adoption. In such cases, only one woman may claim the tax credit for each child, and the tax credit (irrespective of whether its under the normal route or the alternative option) may be claimed only once per child.