September 9, 2016
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.
We at, John M Shanahan & Co, Chartered Accountants, Tullamore, Co Offaly take the view that this is a relief that may sometimes be overlooked due to the trauma associated with placing a parent or close relative in care and this claim comes with a "health warning" of a four year time limit.
Revenue will only allow tax relief at the standard rate of tax (20%) for health expenses, however when it comes to nursing home fees these are allowable at the taxpayers marginal tax rate (top rate of 40%), if applicable.
Its important to note that if you are paying the fees and charges for a nursing home you can claim the tax relief, whether you are in the nursing home yourself or you are paying for another person to be there.
Usually you claim the tax relief at the end of the year but in certain circumstances tax relief may be available in the current year through the PAYE system.
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, Revenue practice is to accept that the person residing in the Nursing Home contributes 60% of their income towards their maintenance.
Where a person residing in the nursing home has availed of financial support under the Nursing Homes Support Scheme or State Subvention and must make a contribution towards their care costs based on their wealth, i.e. savings and properties.
The resident may in effect obtain a quasi loan "Nursing Home Loan" from the HSE by way of deferred payment whereby the HSE pays the Nursing Home on their behalf until after death or the sale of their property,
In this instance the deferred payments will become payable after the death of the individual and, if defrayed out of the estate of a deceased person by his or her executor or administrator, they are deemed to have
been defrayed by the deceased person immediately before his or her death.
These payments may be claimed under the heading of health expenses against the tax liability of the deceased person by the executor of his or estate and are allowable at the individual's marginal rate of tax.
We at JOHN M. SHANAHAN & CO. can assist you with all your taxation requirements by providing expert, specialised and professional service tailored to meet your needs. Contact us for more information.