Many of you may know that tax relief is granted at source for medical insurance (such as VHI, Quinn and Aviva). This means that the amount you pay your insurance provider has already taken tax relief into account.
If you pay for medical insurance as a deduction from your wages this should also take the tax relief into account.
Remember the 4 year time limit – a claim for tax relief must be made within 4 years after the end of the tax year to which the claim relates.
Here’s a quick summary:
Individuals under a certain age on renewal/start date:
- Aged under 50 years for the years 2009 and 2010 only
- Aged under 60 years for the year 2011
If an individual pays his/her own premium then tax relief of 20% is automatically taken into account in the premium paid. Therefore if the gross premium is €1,000, the individual pays €800 to the medical insurance provider.
What if the employer paid the premium for the above individual? The treatment would then be:
|Tax relief at source||200|
The employer will pay €800 to the medical insurance provider and €200 to Revenue through an Income Tax or Corporation Tax return.
The employee will have a benefit in kind of €1,000 and will be taxed accordingly.
The employee will need to reclaim the €200 tax relief by contacting his/her local tax office or by completing the relevant form.
Individuals over a certain age on renewal/start date:
- Aged 50 years and over for the years 2009 and 2010 only
- Aged 60 years and over for the year 2011
If an individual pays his/her own premium he/she gets an age-related tax credit as well as tax relief at source as in the following example:
|Age related tax credit||625|
|Tax relief at source 20% of €875||175|
The amount the individual pays to VHI/Quinn/Aviva is €700 which has already taken the tax relief into account.
Age related tax credits are as follows:
|Age||Policies renewed/started On or after 1 Jan 2009||Policies renewed/started On or after 1 Jan 2010||Policies renewed/started On or after 1 Jan 2011|
|50 – 59||€200||€200||NIL|
|60 – 69||€500||€525||€625|
|70 – 79||€950||€975||€1,275|
What if the employer paid the premium in the above example?
The employer would pay €700 to the medical insurance provider and €175 to the Revenue Commissioners.
The employee would be taxed on a benefit in kind of €1,500 and can claim back the tax relief at source of €175 as well as the age-related tax credit of €625. The age related tax credit can be claimed at the end of the tax year by completing the relevant form and submitting it to your local tax office with your Form P60.
For further information and examples on part-payment of premiums by employers, see the relevant Revenue guidelines.
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