Claiming relief for adult student son’s medical expenses

I have a 23-year-old son who is studying for a PhD. He is in receipt of a Science Foundation stipend. We are paying his annual health insurance and I was wondering if it is possible to claim relief on expenses of the still dependent child.

Ms CB, email

My understanding is that if you are paying the premium, you can claim relief. However, not surprisingly, there are certain conditions.

First, if he is 23, he is not a child for health insurance relief purposes. It doesn’t matter how long he studies for: once he is 23, he is considered an adult.

Furthermore, the Government changed the rules on relief in relation to private health insurance in Budget 2014.

Essentially, from the date of that budget – October 16th, 2013 – relief on any health policy taken out or renewed was limited to 20 per cent of the first €1,000 of a premium for an adult and €500 for a child.

If the premium is higher than that, no relief applies to any amount over the €1,000/€500 threshold. Previously, there was no cap on the amount of the premium against which you could claim the 20 per cent.

The budget confirmed that, for the purposes of the relief, a child was anyone under the age of 18 or under 23 if still in full-time education . . . and “in respect of whom a child premium is paid”.

Outside the issue of private health insurance, you are entitled to claim relief on any medical expenses incurred by you, regardless of whom they were for.

So, if you have incurred medical expenses for your 23-year-old over and above what is covered under the private health insurance, you are entitled to claim relief using the Med 1 form which can be downloaded from Revenue.ie. Again, the rate of relief is 20 per cent.

Whether your son is dependent or not is not the issue, only who has paid the particular bills in any given year.

How does Revenue view wedding gifts?

I am sure you have addressed this query before but I was wondering how Revenue views money received as wedding gifts?

Ms EK, email

This has been a source of contention in recent months as Revenue announced a clampdown of what it considered abuse of the capital acquisitions tax regime. Capital acquisitions tax covers both inheritances and gifts, and there are limits to what someone can receive free of tax.

If you are talking about gifts between a parent and a child, the threshold is €225,000 but this is not a one-off. It is the aggregate sum (ie total) of all gifts and inheritances received by a child from both parents since December 5th, 1991.

What is not included is any gift of €3,000 or less in any year from either parent – or indeed anyone else. This small gift exemption is discarded for the purposes of assessing liability to capital acquisitions tax.

Until now, money spent by a person for the support, maintenance or education of their children was exempt from capital acquisitions tax as long as it was part of the normal expenditure of a person in their circumstances and was reasonable, having regard to their financial circumstances.

However, the new, tighter rules restrict this to spending on a minor (ie under 18), or someone between the ages of 18 and 25 in full-time education, or a child of any age who is permanently incapacitated.

There is also some guidance on what constitutes “normal” support and “normal” expenditure. Buying a child a house, or giving them free use of one, for instance, is not allowed. Nor is providing a deposit for a house or even a cash sum in excess of €3,000.

However, alongside allowing a child of any age to live in the family home or covering reasonable costs involved in attending college (including providing accommodation rent-free), the good news is that the cost of family functions such as weddings are exempt from calculation of any capital acquisitions tax liability.

This has always been the case and, Revenue says it will continue to be so.

However, Revenue also says any wedding gift that a parent gives a child at their wedding must be under the €3,000 limit of the small gift exemption or it will count against a person’s lifetime CAT tax-free threshold of €225,000.

The same presumably is true of gifts from other people where, if in excess of €3,000, the thresholds are lower. Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice