What if you couldn’t work due to illness or injury? Income protection provides vital security, and here in Ireland, you can get tax relief on your income protection, making this important cover more affordable. At Irish Tax Rebates, we cut through the noise to help you understand and claim what’s yours. We’ve answered your top questions about income protection tax relief so you can get the tax back you’re owed.
In this blog post, we will explain everything you need to know about how bonuses are taxed in Ireland, including:
- What is income protection?
- Does income protection cover all illnesses?
- Is income protection worth paying for?
- Who can get income protection tax relief?
- How does income protection tax relief work in Ireland?
- What is the rate of tax relief on income protection?
- What is the maximum income protection amount?
- Is there a limit to the tax relief you can claim on income protection?
- How is income protection calculated?
- How to claim income protection tax relief
- Can you claim income protection tax relief for previous years?
- What is income continuance tax credit?
What is income protection?
Income protection is an insurance policy that gives you a regular income if you can’t work because you’re sick or injured for a long time. It helps cover your bills when you can’t earn your minimum wage.
Does income protection cover all illnesses?
Yes, income protection is designed to cover most illnesses or injuries that stop you from working for a longer period.
Is income protection worth paying for?
Yes, income protection is worth paying for if you’re ever unable to work due to illness or injury. It’s particularly crucial if you work in a high-risk job, like construction or other physically demanding roles, where the chance of an accident is high.
Who can get income protection tax relief?
Generally, if you’re working more than 16 hours a week and paying for an income protection policy that Revenue approves, you can get the tax relief.
How does income protection tax relief work in Ireland?
When you pay for your income protection, the government gives you some of that money back through tax relief. This makes your insurance cheaper.
You get this money back at your highest tax rate, which is either 20% or 40%. So, if you pay 40% tax, you can claim back 40% of your premiums.
What is the rate of tax relief on income protection?
The tax money you get back will be 20% or 40% of what you paid, depending on your income.
What is the maximum income protection amount?
In Ireland, you can usually protect up to 75% of your income before tax.
Here’s how it works:
- If you’re an employee: This 75% usually include the Illness Benefit you get from PRSI benefits. So, your income protection policy would pay you enough to bring your total income up to that 75% mark, after taking into account the State benefit.
- If you’re self-employed: You normally don’t get State Illness Benefit, so your policy can cover the full 75% of your income itself.
Is there a limit to the tax relief you can claim on income protection?
Yes, you can get tax back on your income protection payments, but only up to 10% of your yearly income.
How is income protection calculated?
When it comes to income protection, two factors get calculated:
- How much you get paid:
- This amount is usually a percentage of your income before tax (your gross income). Most often, you can protect up to 75% of what you earn
- So, if you make €40,000 a year, you could potentially get payments of up to €30,000 a year if you couldn’t work (€40,000 x 75%)
- How much you pay for it:
- The cost of your policy is worked out based on a few personal details:
- Your age: Generally, the younger you are, the less it costs
- Your health: Your current health and any past medical issues are considered
- Your job: Some jobs are seen as higher risk than others, which can affect the price
- The waiting period you choose: This is how long you’d wait (e.g., 4, 8, or 13 weeks) after stopping work before payments start. A longer wait usually means a lower premium
- How long you want payments for: This is usually until your planned retirement age
- The cost of your policy is worked out based on a few personal details:
How to claim income protection tax relief
Claiming your income protection tax relief in Ireland is quite straightforward. Just follow these five simple steps:
- Log into your Revenue MyAccount
- Head to “PAYE Services”
- Click “Manage your tax”
- Select “Claim tax credits”
- You will find “Income continuance” under the “Health” section as well
We understand, however, that claiming different tax rebates on your own can be overwhelming. Our accountants at Irish Tax Rebates can easily identify what you might be owed back and will fight for every cent.
Need help claiming back what you’re owed in Income Protection Tax Relief? Contact us today.
Can you claim income protection tax relief for previous years?
Yes, you can claim income protection tax relief for the past four tax years.
What is income continuance tax credit?
Income continuance tax credit (also known as Permanent Health Benefit) is another way of describing Income Protection Tax Relief. Income continuance tax credit is the tax back you can get on the money you pay for your income protection insurance policy.
Don’t miss out on your Income Protection Tax Relief! We will simplify your claim and get your tax back.
