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Tax relief for
Nursing Home Care
An individual may claim tax relief in respect of the costs (less any
amount paid by a public or local authority, insurance scheme or other
compensation) of maintaining a relative in a nursing home
which has been approved by the Minister for Health and Children.
The first 125 per person does not qualify for relief. Where several
dependents are the subject of a claim, the overall restriction is 250
for a group.
The tax relief is available at the taxpayer's highest rate of tax and
can be claimed by completing form Med 1.
An individual may claim tax relief in respect of costs incurred relating
to a relative or any other person who is either over 65 or permanently
incapacitated by reason of mental or physical infirmity.
The definition of 'relative' for Health Expenses is very wide and
includes a spouse, ancestor, lineal descendant, brother & sister,
brother-in-law & sister-in-law, parents-in-law or any other child (not
being a child of the claimant) in the claimant's custody who is
maintained by the claimant.
In cases of hardship, PAYE taxpayers may be given the relief through the
PAYE system on a weekly or fortnightly basis, to help meet the cost,
rather than waiting until the end of the tax year.
If part of the costs of the nursing home are shared with other family
members or relatives, an individual may claim in respect of the portion
paid by him/her.
In some cases, the person residing in the nursing home may pay some of
the costs from his/her own income and this can affect a claim. Before
calculating the relief, any costs paid by the resident in the nursing
home is deducted from the claim (or a maximum deduction of 60% of the
resident's income ) For example:
You maintain a dependent in a Nursing Home and you claim relief in
respect of the expenses, which total 15,000. Your dependent has an
income of 8,000, which is available directly or indirectly towards the
costs.
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Health Expenses attributable to Dependent |
15,000 |
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Deduct: 60% of Dependents Income (i.e.) 8,000 x 60% |
4,800 |
|
Health Expenses claimable by you |
10,200 |
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Employing a
Carer - Tax Credit
Where a person is permanently incapacitated due to physical or mental
infirmity, a tax allowance of up to 30,000 is available towards the
cost of employing a person to care for the incapacitated person. This
credit may be claimed either by the incapacitated person or by a
relative including relatives by marriage.
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Dependent
Relative Tax Credit
This tax credit is available if you are maintaining either:
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a relative of you or your spouse who is so incapacitated by old age
or infirmity as to be unable to maintain himself/herself.
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your or your spouse's widowed mother/father whether she/he is
incapacitated or not
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a child of yours who lives with you and on whose services you are
dependent because of old age or infirmity.
The Dependent Relative Tax Credit for 2004 is 60 . No credit is due if
the dependent relative's income in the year 2004 exceeds 10,373 . You
no longer need to qualify for the dependent relative tax credit in order
to claim health expenses in respect of a dependent relative.
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Covenants
Covenants may still be made for people over 65 or those who are
permanently incapacitated.
A Deed of Covenant is a legal document under which one person agrees to
pay a certain sum of money each year to another person. The advantage is
that the person paying the money can effectively not pay tax on it. The
money is transferred to someone who does not have a taxable income or
pays a lower rate of tax than the person giving the money.
The covenant is a legal document but you do not need to go to a lawyer
to draw one up. The tax office will give you a standard form of covenant
or you may get one from the bank. The covenant must be capable of
lasting at least 6 years. The person who covenants the money may not end
the covenant unilaterally but both parties may agree to end it. This may
happen before the 6 years are up but that does not matter as long as it
was capable of lasting when it was made.
There is no tax relief on most covenants, other than covenants for the
benefit of the elderly (over 65), permanently incapacitated people,
maintenance payments between spouses, research and the teaching of
natural sciences and recognised human rights organisations. Most
covenants are subject to a 5% income restriction, except for covenants
for the permanently incapacitated and those for maintenance payments
between spouses.
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Rules
Rates
: The Dependent Relative Tax Credit for 2004 is 60 .
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How to apply
Download and complete Form MED 1 (PDF) at the end of the tax year and
send it with receipts for the expenses incurred together with your tax
return form to your tax office.
Additional information is available in the Revenue information leaflets
IT 45 "Tax Credits and Reliefs for over 65's" (PDF)and IT46 "Dependent
Relative Tax Credit" (PDF) which are also available from any tax office,
the Revenue website or from Revenue's forms and leaflets service at Lo
Call 1890 306706.
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Where to apply
Call or write to your local tax office.
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