What it is
The Earned Income Credit (EIC) is a tax credit available to self employed people, proprietary directors (more than 15 percent shareholding), and certain other non PAYE earners. It reduces the income tax bill by up to €2,000 in 2026.
Eligibility
You qualify if you have:
- Self employment trading or professional income
- Director's fees from a company in which you hold more than 15 percent of the shares
- Farming profits
The credit is restricted if your earned income is low. The credit is the lesser of €2,000 or 20 percent of qualifying earned income.
Worked example, full credit
Saoirse is a self employed graphic designer with profit of €40,000.
- Income tax at 20 percent on €40,000 = €8,000
- Less Personal Tax Credit = €2,000
- Less Earned Income Credit = €2,000
- Annual income tax = €4,000
Worked example, restricted credit
Tomas has self employed profit of €5,000 (low first year).
- 20 percent of €5,000 = €1,000
- Earned Income Credit limited to €1,000
Interaction with PAYE Credit
If you have both PAYE and self employed income, the combined credit cannot exceed €2,000. Revenue applies the credit to whichever income source first uses it during the year. You cannot claim €2,000 PAYE credit plus €2,000 EIC.
Worked example, mixed income
Ciara earns €30,000 employment and €15,000 self employed.
- PAYE Credit: €2,000 (full)
- Earned Income Credit: €0 (already at €2,000 cap from PAYE)
Director scenario
Conor owns 60 percent of his own company and pays himself a director's salary of €60,000 through PAYE.
Because his shareholding exceeds 50 percent, he is not entitled to the Employee PAYE Credit on that salary. He claims the Earned Income Credit instead.
- Salary €60,000 taxed through PAYE
- Employee PAYE Credit: not available
- Earned Income Credit: €2,000
How to claim
Self employed taxpayers claim the EIC on the Form 11 income tax return, lodged by 31 October following year end.
Carry back or forward
The EIC cannot be carried back or forward. Unused credit in a year is lost.
Educational notice
This article is general information. Always seek qualified tax advice for self employment and director taxation matters.