Can I get tax back on fees for nursing homes?
My father has gotten very ill. Although he qualifies for a place in a nursing home under the Fair Deal scheme, the waiting list is so long that we have had to arrange a place for him in a private nursing home in the interim.
The fees are enormous and are crippling our family. Can we get tax relief on them?
Gorey, Co Wexford
Pat O'Brien replies: Tax relief is available on qualifying nursing home fees at an individual’s marginal rate — that is, the highest rate of tax payable by the claimant. For most people this will be 41pc. To qualify for relief, your father must be receiving treatment and maintenance in a nursing home on the advice of a medical practitioner. It is also a requirement that the nursing home provides 24-hour, on-site nursing care. Tax relief is available to any individual who pays these fees. Therefore, if you are sharing the cost with other family members, each individual can claim tax relief for their share. If your father has income in his own right and is contributing towards these fees, he too can claim tax relief at his marginal rate.
Tax relief is normally given by making a refund claim at the year end and completing a Form Med 1. In cases of hardship, it is possible to claim relief for nursing home expenses during the tax year. If you are a PAYE taxpayer, you should contact your local Revenue office to arrange for the issue of an amended tax credit certificate. You will still be required to complete a Form Med 1 after the year end, regardless of how the relief has been given.
Tax relief at 20pc is also available on any additional medical expenses, such as prescriptions, medical devices and so on. This relief can be claimed by completing the Form Med 1 following the year end.
Income tax on renting an apartment
I have been renting out an apartment for a number of years. I never declared the rental income to the Revenue Commissioners because the rent isn’t even covering the mortgage. I have just received a tax return form in the post in relation to this property. What do I do?
Gemma, Salthill, Co Galway
Pat O'Brien replies: You are obliged to complete the tax return and return it by 31 October. Although you mention that the rental income does not cover your mortgage payments, unfortunately this does not necessarily mean that a tax liability does not arise.
A deduction can be claimed against rental income for certain expenses incurred, such as repairs, management fees, letting agents, insurance and so on. The cost of preparing accounts and returns can also be deducted. While a deduction is available for mortgage interest, this is limited to 75pc of the interest paid. Certain other expenses are not allowable for tax purposes, including the Non Principal Private Residence Charge, the local property tax, and expenses of a capital nature. In the case of fixtures and fittings, while you cannot claim the cost as an expense in the year that the item was purchased, you are entitled to an annual deduction equal to 12.5pc of the cost, over eight years.
It is possible that you may have incurred losses in the earlier years of the letting, when mortgage interest rates were higher. If so, you can offset these losses against any profits in the later years. If you genuinely cannot afford to pay any tax that may be due at this time, you should speak with Revenue to see if an instalment arrangement can be agreed.
Pat O’Brien is tax director with Ernst & Young