Medical costs, private health insurance and tax relief

I was looking at my VHI, and it has frequent questions, one of which is: Can I claim tax relief? VHI answer is: “Yes. For people aged 21 and over, including young adults, all health insurance policies and renewals have a maximum of 20 per cent tax relief applied to gross premiums up to €1,000. This means the maximum tax relief will be €200.”

My question is, can one claim back a maximum of €200 every year, even if there is no claim? This is something new to me in all my years of paying for VHI.

The second question is also in this vein. Let’s say I have a medical receipt for €100, the VHI claim gives back €30, can the balance of €70 be claimed in a tax return?

Mr G.N.

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Private health insurance is not cheap in Ireland so making sure you avail of any tax relief available is important.

The good news is that yes, tax relief is available on private health insurance premiums and has been for many years. This relief is not related to whether you have made any claims against the policy; it is granted on the cost of the premium you are paying. It does not just apply to VHI, of course, but to any policy taken out with any of the insurers in the private health cover market.

And, on this score, you are in luck. The standard rule with tax relief claims is that you can go back four years before the current tax year, and no further. In your case, this would have left you significantly out of pocket if you had not claimed the relief available on your private health policy. But, with private health premiums, the relief is granted at source.

That means it is subtracted from your premium by the VHI before it charges you anything, so you have not been missing out on the relief available over the past several decades.

Of course, on the downside, this means there is no money due to you on having now discovered the availability of tax relief.

I guess it might be easy to miss in the mound of paperwork that generally arrives with your health policy renewal. My most recent one had 13 pages of paperwork – which can be overwhelming for many people.

In the case of VHI, the page you want to refer to is the second page in the documents they send you, headlined, “Your health membership certificate”.

If you look down that page, you will come across the section on your premium details. It will have nine or 10 sections running across the page. These include your name, the gross premium, an RE [risk equalisation] premium credit, any discount pertaining to the policy, a figure for the gross premium after those credits and discounts, any age loading and then the gross premium net of all those reductions. This is the key “gross premium” figure.

The next section states “tax relief at source” and, given the price of private health policies these days, this is likely to be €200. The final box has your net premium, which is what you are paying over the following 12 months.

Details will be presented in broadly the same way for the other insurers, I am guessing.

The maximum relief is 20 per cent up to a premium of €1,000 for an adult and 20 per cent of a premium of up to €500 for a child. So if your premium is below €1,000, you get 20 per cent of that; if it is above €1,000, the relief is capped at that €200. For a child similarly, the cap is €100 on any premium of €500 or over.

Interestingly, the definition of a child has changed over the years but now covers insured people under the age of 21, not 18. Until 2015, it could cover people up to the age of 23 if they were in full-time education.

The relief used to be more generous – 20 per cent of the actual premium paid – but that was reduced in the Finance (No 2) Act 2013. There was a row at the time as it emerged that 1.1 million people would lose out under the new rules.

[ Are you getting the most out of your health insurance? Many of us fail to claim these benefits ]

So that’s the health premium. But what about medical costs that are not covered by the policy?

Taking your example, if you have a medical receipt for €100 and the VHI agrees to cover €30 of that, you are out of pocket personally for the balance of €70.

The good news is that you are allowed to claim against your income tax for any medical costs that are not otherwise covered by your private health insurance – for those that have it – or by other schemes such as the Drug Payment Scheme, which currently limits the amount you can be charged for prescription medicines to €80 in any one month.

Everything, including GP fees, can be claimed back.

The relief is granted at 20 per cent of the sum claimed – unless you are claiming for long-term nursing home care which is granted at a person’s higher rate of up to 40 per cent – so it won’t make you rich but better in your pocket than in Revenue’s.

To be fair, Revenue regularly reminds people they should be claiming such reliefs, and it is an area we cover annually or more frequently as they issue such reminders. Health expenses are apparently the relief to which people are entitled that they claim the least, so you are not alone.

You used to file for relief under what was called a Med 1 form (a Med 2 form covered more restricted reliefs for dental costs) but now you claim relief on a basic tax return form.

Many PAYE people are not familiar with these but they are fairly straightforward and are now required where you either have income outside the PAYE sector – such as perhaps rental income from a holiday home – or where you are claiming additional tax reliefs.

Most people now make their filings online to Revenue having set up a MyAccount account. For those unable to file online for any reason, you can file a Form 12 income tax return or, more likely in your case, a simplified Form12S shortened form for those making a claim for something basic such as health costs.

The bad news is that you will only be able to claim back medical costs over the last four years – the four years prior to the current tax year – so, since the start of 2019 as long as you make the claim before the end of this year.

And you will need to hold on to any receipts that you are claiming against. You don’t have to send these to Revenue but they have the right to seek them over the next few years if they choose to.

On dental costs, unless medical where GP costs are covered, routine visits, dental cleaning and fillings are not covered, though things like crowns will be. Of course, you might find that you are entitled to free dental check-ups under your PRSI record, so don’t forget to check that out. Your dentist’s surgery can do that for you if you ask.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice