What is Earned Income Tax Credit (EITC) in Ireland?

EITC rates are increasing in 2025

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The Earned Income Tax Credit (EITC) was introduced in Ireland in 2016 to help reduce the tax load on self-employed individuals, entrepreneurs, and those outside of traditional PAYE (Pay As You Earn) employment. The EITC rate will increase in 2025, providing additional relief for those eligible. In this guide, you’ll find everything you need to know about the Earned Income Tax Credit, including the upcoming rate changes, how to calculate what you can claim, and whether you qualify.

Key takeaways
  • What is Earned Income Tax Credit: EITC is a form of tax relief, reducing the tax burden for self-employed individuals and those with additional non-PAYE income

  • Earned Income Tax Credit in 2025: Rates will increase to a maximum of €2,000, offering greater tax savings for those with qualifying income

  • Claim limits with other tax credits: If you qualify for both the EITC and Employee Tax Credit, the total claim is capped at €2,000

What is Earned Income Tax Credit?

Earned Income Tax Credit (EITC) is designed to support self-employed individuals and those earning supplementary income outside of traditional employment. It specifically targets those generating income from their trading or business activities. Earned income credit is one of several tax credits in Ireland that help to reduce the amount of income an individual pays for tax.

Introduced in January 2016, the EITC was created to alleviate the tax pressure on those with non-PAYE income. The goal is to bring the taxation of non-traditional employment in line with that of PAYE employees. By doing so, it acknowledges the valuable contributions of individuals running their own businesses or operating outside the PAYE system.

One key distinction of Earned Income Tax Credit in Ireland is that it is specifically available to self-employed individuals, unlike Employee Tax Credit. As a result, it levels the playing field in the Irish tax system, as it means everyone has access to tax relief, regardless of what kind of employment they have.

What qualifies as earned income?

Earned income is the money individuals make from active work. This includes wages and salaries from employment, as well as profits from self-employment or running your own business. In Ireland, earned income is classified under Class I and II tax categories: Case I applies to profits from trades, while Case II covers income from professions. Earned Income Tax Credit also applies to salaries earned by proprietary directors, which includes business owners and their spouses or civil partners.

What doesn’t qualify as earned income: Earned income does not include passive income sources, such as rental income, dividends, or interest from savings. This is because they don’t stem from active work. Earned income credit is designed specifically for those who are actively contributing to their financial growth through their trades or businesses.

How does Earned Income Tax Credit work?

Tax credits in general work by directly reducing the amount of tax you owe. They function as a tax deduction. After your tax is calculated as a percentage of your income, the Earned Income Tax Credit is deducted, lowering the final amount you need to pay.

Earned income credit is calculated as either:

  • 20% of your qualifying earned income

or

  • up to €1,875 (increasing to €2,000 from 2025).

Whichever amount is lower will apply.

How do I claim Earned Income Tax Credit in Ireland?

You can easily submit your claim for Earned Income Tax Credit through the Revenue website’s myAccount service. This service lets you claim the tax credit not only for the current year but also for previous years. If your claim results in an overpayment, you’ll receive a refund, which typically goes directly to your bank account or whichever method you have filed with Revenue.

To track the status of your claim, simply log in to myAccount and check your tax profile. If you’re entitled to the EITC, you should see your tax refund processed within a few weeks.

Another way to claim the earned income credit in Ireland is by filing your self-assessment tax return. If you’re self-employed or run a business, you can include your claim for the EITC when submitting your Form 11 tax return at the end of the year.

December update: Upcoming tax changes from Budget 2025

Last updated: 06.12.2024

Budget 2025 introduced several important tax changes that will impact individuals and families across Ireland. For personal income tax, the income thresholds have increased. The standard rate tax band (the amount you can earn before having to pay the higher tax rate) will rise by €2,000 to €44,000 for single individuals. Married couples and civil partners will see similar proportional increases.

Tax credits are also on the rise. Earned Income Tax Credit is increasing to €2,000 from €1,875, providing more relief for taxpayers. For homeowners and renters, significant adjustments were made to the Rent Tax Credit, which has now increased to a maximum of €1,000 for individuals and €2,000 for jointly assessed couples. This change will make it easier for families to manage housing costs.

Can you claim both employee tax credit and earned income credit?

Yes, you can qualify for both the Employee Tax Credit and Earned Income Tax Credit. However, there is a limitation: the total amount you can claim from both credits cannot exceed the Employee Tax Credit amount, which will also rise to €2,000 in 2025.

This means that even if your income means you qualify for both credits, the maximum tax relief you can receive is capped at €2,000. So it can benefit you to qualify for both, but ultimately, you’ll never be able to claim more than €2,000.

How is Earned Income Tax Credit calculated?

Here is how this would look in practice, using the example of Liam, who qualifies for both tax credits.

In 2025, Liam had a salary of €8,000 from his part-time job and a small profit of €4,000 from his freelance graphic design business.

In this case, he would receive an Employee Tax Credit on the salary of €1,600 (€8,000 x 20%) and an Earned Income Tax Credit of €800 (€4,000 x 20%), giving a total of €2,400.

However, the maximum tax credit he can claim between the two is €2,000, so the Earned Income Tax Credit is now limited to €400.

Final claim:

Employee Tax Credit: €1,600

Earned Income Tax Credit: €400

Total claim: €2,000

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