For many people, homecare makes a world of difference to their quality of life. That can apply no matter how much care a person receives. Some may have such challenging needs that they need a carer on hand 24 hours a day. Others might just want to see a friendly face a few hours a week to keep them from feeling alone and isolated. Whatever the circumstances, homecare is a sound investment in a better future. Read on to find out how you could get help to fund homecare for your loved ones.
Understanding Homecare Costs
Homecare costs will vary from provider to provider. They will also depend on when an individual needs the care. For example, overnight, weekend and Bank Holiday work are likely to command a higher rate.
When you compare the typical hourly rate to the price of a weekly shop or tank of petrol, it puts the costs into perspective. We believe our competitive rates are a small price to pay for the benefits they bring.
Under certain circumstances, there are ways you can reduce the costs of paying for care by up to 40 percent through tax relief. There are certain rules and dependencies around when and how you can claim tax reliefs for care.
We’ve made a simple step-by-step guide to help you understand it all.
Key Facts About Tax Relief on Homecare Costs
The rules around tax relief apply whether you take on a carer for another family member or for yourself. You then have the choice of employing a carer directly or through an agency that employs carers. You can apply for tax relief under either circumstance.
It’s worth bearing in mind that employing a carer yourself comes with certain responsibilities. These include taking care of your employee’s tax and social insurance contributions. If you use a private agency instead, then it will take care of all this for you.
Who is Eligible for Tax Relief?
If the person receiving the care is a family member, they must be a spouse, civil partner or child. They could also be a relative through marriage or civil partnership.
The person who receives the care has to be in a totally incapacitated state during the tax year. This means they must have a disability and be in need of a carer.
At some point, the Revenue Commissioners may ask for a medical certificate as confirmation of the type of disability. However, you do not need to send one with your initial application form.
You will not be able to claim tax relief if your carer only performs housekeeping duties. Those in receipt of an Incapacitated Child Tax Credit or a Dependent Relative Tax Credit are also ineligible for tax relief.
The Revenue Department does not allow you to claim relief for any funding you get for employing a carer from a local authority or the HSE.
How Does Homecare Tax Relief Work?
Standard rates of income tax are 20 percent and 40 percent in Ireland. Put simply, there is an earnings threshold after which you will pay the higher of these two rates. This threshold varies depending on whether you are single or married.
When claiming tax relief for homecare costs, you can claim at your highest tax rate but on the lower of these two figures:
- The actual cost you pay for homecare
- The maximum deduction of €75,000
If you want to claim relief, you must do it every tax year.
How Do I Apply for Tax Relief When Paying for Care?
The simplest way to claim the tax relief you’re due is to use the Revenue’s myAccount service. You can also claim by filling out a Form HK1 and sending it to your Revenue office either during the tax year or once it ends.
Remember that you have to make any claim for tax relief within 4 years of the end of a tax year to which your claim relates.
Real-Life Examples of Homecare Funding and Tax Relief
To make it easier to see how tax relief could work for you, we’ve drawn on some real examples that show how much people have saved after paying for care.
Example One: Mary and her mother, Grace
Mary’s Mum Grace became incapacitated in August 2019. Mary earned €60,000 in the 2019 tax year. The homecare costs Mary paid out each month on behalf of her mother were €5000.
That means Mary paid out €25,000 euro in homecare costs during 2019. Because of the tax rate she paid on her earnings, she was able to claim back 40 percent of this from her Revenue office. She received a reimbursement of €10,000 in total.
Example Two: John his sister, Martha and their Aunt Jean
John and Martha have always seen their Aunt Jean as a second mother. Jean never had children of her own and so John and Martha stepped in when she became incapacitated after a short illness in March 2020.
Jean’s homecare costs came to €1,000 a month, making a total of €10,000 in the 2020 tax year. John paid €6,000 and Martha paid €4,000 to cover these costs. The Revenue calculated the tax relief each received back on a pro-rata basis.
Both John and Martha’s earnings fell below the 40 percent income tax threshold. John, therefore, received €1,200 and Martha €800. John submitted his claim using a Form HK1. Martha used the Revenue’s myAccount service.
We Are Always on Hand to Help You
We recognise that understanding the rules around tax relief can be bewildering at times.
Whatever your circumstances, you can be sure that we have the experience to help you through all aspects of homecare funding.
Even if you are not working or paying taxes, you could still receive cash back from the Revenue department. This can happen through other members of your family up to a maximum of €75,000 and at their marginal tax rate.
If you or a loved one needs any type of homecare, get in touch with us now to find out how we can help.