Thousands of Irish health insurance customers are leaving money on the table every year
'If I have private health insurance, I'm not entitled to tax relief, right?'
Emm.. not exactly!
Many people in Ireland assume that if they have health insurance they are not entitled to tax relief on their medical costs.
Thousands of euro in unclaimed tax relief is left on the table every year.
The fact is that it doesn't matter whether you pay for health insurance yourself, or your premium is covered by your employer – the likelihood is that you will be entitled to tax relief.
In this blog we'll take a look at your tax entitlements if you have health insurance and what you need to do to claim your tax back.
Tax relief at source
First things first, if you pay for private health insurance you're entitled to benefit from tax relief at a rate of 20 per cent on the cost of the premium.
However, you don't have to claim this relief from Revenue in order to benefit. Instead the relief is automatically given as a discount on the cost of the policy. This is known as tax relief at source (TRS).
In other words, a €1,000 annual health insurance premium will cost you €800.
But what happens if your employer pays for health insurance? Can TRS still be claimed?
The average Irish tax refund is €1,880
Health insurance paid by employer
There are two important points to keep in mind when your employer pays your health insurance premium.
The first is that Revenue will consider this to be a Benefit in Kind and this means that you will be taxed on the gross value of the policy.
The second is that the TRS system does not kick in when your employer pays for your premium. In other words, there will be no discount on the cost of your premium and you will need to claim the tax relief directly yourself.
Generally tax relief is available at 20% of the gross amount paid by the employer. And yet, due to a lack of awareness and confusion surrounding the tax relief, thousands of people miss out on claiming this tax back every year. In fact, it is estimated that a massive 400,000 people have health insurance that is either fully or partially paid for by their employer.
It's important to note that if your employer only pays a percentage of your policy cost, the relief you can claim is restricted to that percentage. In other words, if they pay for half of the costs, you are entitled to claim relief on that half. This is because the portion of the policy you pay for yourself will have already been discounted (TRS).
In order to avail of this tax relief, you must file an annual tax return and include details of the gross premium paid on your behalf by your employer (on which you have been charged BIK).
If this is your first time claiming the relief, and your employer has paid for your health insurance in the past, you're in luck!
In a similar fashion to claiming tax back on typical medical expenses such as doctor's bills and prescriptions, you can go back four years to claim tax relief on your health insurance (provided you haven't done this before).
It's also important to keep in mind that you can only claim tax relief on medical insurance premiums on the first €1,000 per adult, and the first €500 per child.
So for example, John's employer has paid his health insurance premium in full for the last four years (€1,500 per year or €6,000 in total). John is entitled to claim tax relief on €1,000 per year and he is due a total refund of €800.
Meanwhile, Jenny's employer only pays half of her €1,000 premium. Jenny is entitled to tax relief of €400 for the last four years.
You will be entitled to further tax relief if your health insurance doesn't cover all of your medical costs.
For example, Alan is in hospital to undergo a medical procedure. The cost of this procedure is €2,000. Alan has private medical insurance and as part of his policy he must pay the first €500 in excess. Alan is entitled to claim tax relief at 20% of €500 (€100).
Keep you receipts!
Of course, if you want to claim tax relief on your medical expenses, it's vital to keep all of your relevant receipts and documents in a safe place.
Simply put, if you file a tax return to claim tax back, you may be subject to an audit from Revenue. And should the taxman come calling, you'll need to able to account for every expense you are claiming.
When you consider that the average PAYE tax refund is €1076, it's easy to see why applying for your tax refund makes so much sense.
When you quickly apply online with Taxback.com, you're guaranteed to receive your maximum tax refund. Our team of tax experts will ensure you avail of every credit and relief you're entitled to.
Forget boring tax forms. Let us do the paperwork! Your refund will be delivered straight to your bank account!
The average Irish tax refund is €1,880