Michael Creed (Cork North West, Fine Gael)
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37. To ask the Minister for Finance if he will clarify the situation as it applies to separated couples in respect of the standard tax rate cut-off point where there is a legal separation and shared custody of children; and if he will make a statement on the matter. [55776/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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The position is that married persons or civil partners who are legally separated are generally taxed as single persons from the date of their separation. A formal separation for this purpose means a separation under an Order of Court or Deed of Separation, or other circumstances in which the couple are in fact separated and the separation is likely to be permanent.

As single persons, each party is assessed to tax on his or her own income and is entitled to his or her own standard rate tax band and basic personal tax credit, which are valued at €36,800 and €1,700 respectively for the 2022 year of assessment.  

Where the couple have qualifying children, the single person child carer tax credit may also be available. A qualifying child for this purpose means:

- a child born during the year of assessment;

- a child who was under the age of 18 at the start of the year of assessment; or

- a child who was over the age of 18 at the start of the year of assessment if he or she is either in full-time education or, is permanently incapacitated by reason of mental or physical infirmity from maintaining themselves and had become so incapacitated before reaching the age of 21 or whilst in full-time education.

This credit is valued at €1,650 for the 2022 year of assessment and is granted to the primary claimant in the first instance. The primary claimant is the party with whom the child resides for the whole or greater part of a year of assessment, being a total period of 6 months. Where a child resides with both parents for an equal amount of time in a year of assessment, the primary claimant will be the party who receives a child benefit payment in respect of the child.

The primary claimant may relinquish his or her entitlement to the tax credit in a year of assessment to a secondary claimant if he or she wishes. A secondary claimant may be a person with whom the child resides for a period of at least 100 days in a year of assessment.

Only one tax credit is available per claimant in a year of assessment, irrespective of the number of qualifying children residing with him or her. Where an individual is in receipt of the single person child carer tax credit for a year of assessment he or she will be entitled to an additional €4,000 in their standard rate tax band in that year also. The increased standard rate tax band for an individual in receipt of the single person child carer tax credit is valued at €40,800 for the 2022 year of assessment.

I am advised by Revenue that in certain circumstances formally separated couples may make an election for ‘separate assessment within joint assessment’. Under this basis of assessment, each party is assessed to tax as a single person during the course of the year of assessment, with each party being entitled to his or her own standard rate tax band. The increased basic personal tax credit, which is valued at €3,400 for the 2022 year of assessment, will be split equally between both parties, as will any age tax credit, blind person's tax credit and incapacitated child tax credit due to the couple.

Following the year of assessment, it may be possible for some of the unused tax credits, reliefs and standard rate bands of one party to be transferred to the other party in the same manner which usually applies in joint assessment cases. Ultimately, this means that the aggregate tax payable by each party under this basis of assessment cannot exceed the tax which would be payable had the parties been jointly assessed.

This option is only available where both parties to the couple are resident in the State and legally enforceable maintenance payments are being made by either party to the couple in that year of assessment. Where a couple opts to make an election for ‘separate assessment within joint assessment’ in a year of assessment, neither party to the couple will be entitled to the single person child carer tax credit or associated increase in the standard rate tax band in that year.