Tax Relief on Health Insurance

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JimmyCorkhill

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Hi

The company I work for pays health insurance, the policy is with VHI and according to my VHI account the total premium is €1,195.72 for the period 1st August 2021 to 31st July 2022.

Also in my payslip, there is a line item each month under the Payments Section - "Medical VHI BIK" for €116.31. €116.31 would work out at €1,395.72 which seems to work out at €200 more than what it says under my VHI account for the premium.

Looking at my payslip, I have tax credits of €3,500 which presumably includes a €200 medical credit.

So from reading the revenue website, it seems A) My employer is paying my insurance premium & B) I am being taxed on the gross value of the premium (€1.395.72).

So my question is, am I am able to claim medical insurance tax relief or by virtue of the fact I am getting a €200 tax credit is that offsetting that & I cannot claim anything?

Thanks
 
That looks and sounds correct.

The credit is capped at €200 and you pay BIK on the premium after it has been grossed-up to take account of the credit.
 
Gordon Gekko said:
That looks and sounds correct.

The credit is capped at €200 and you pay BIK on the premium after it has been grossed-up to take account of the credit.
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Thanks for your reply. I was half hoping there was still something there for me to claim back :)

A somewhat related question.

If I left my job tomorrow and moved to a company that did not pay health insurance for their employees, I would need to look at purchasing it myself. Assuming I purchased a similar Plan (which looks like it costs €1,395.72) what additional income should I factor into a new package with the new company to cover this additional cost?

My figures could be wrong here, but high-level estimate. If I am currently paying BIK on €1,395.72 - it is probably currently costing me say 52% of that, so lets say €1,395.72 x 52% = €726. I will exclude the €200 tax credit as I would get it in my current and a new role in a company that did not offer Health Insurance presumably.

For me to purchase health insurance at €1,395.72 myself, I am probably going to need to earn €2,500 odd gross (before paying 50% odd tax).

So is it a fair assumption to say, I should be looking for an extra €1,800 odd (€2,500 - €726) in additional gross salary from a new role to cover the impact of paying for health insurance on my own?

Thanks for any help or advice.
 
If the premium is €1,396 and you pay it yourself, you get the €200 credit at source, so it costs you €1,196.

So I guess you need to earn double that or thereabouts to cover it, €2,400 odd.
 
Gordon Gekko said:
If the premium is €1,396 and you pay it yourself, you get the €200 credit at source, so it costs you €1,196.

So I guess you need to earn double that or thereabouts to cover it, €2,400 odd.
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Thanks, and currently it is costing me around €700 (via BIK Tax). So I am thinking around an extra €1,700 is what I will require to cover the increase for me.
 
JimmyCorkhill said:
So is it a fair assumption to say, I should be looking for an extra €1,800 odd (€2,500 - €726) in additional gross salary from a new role to cover the impact of paying for health insurance on my own?
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No, that's not correct. You need to earn the same gross amount including your current BIK to be in the same net position. You can check this for yourself with any income tax calculator (e.g PWC's)

ScenarioAB
Income€50k€51.5k
BIK (health)€1.5k-
Med Relief€200€200
Net take home€36,280€37,780
Net increasen/a+ €1,500

It's a bit of a confusing at first but effectively you have always paid tax on €51.5k so if you swap the health premium for cash, you will not pay any additional income tax and will therefore get the full benefit of the cash value. The only way you would be down is if you chose not to buy your own health insurance, then you lose the €200 relief.

With that said, I would still ask your new employer for the extra €2.5k :) No harm in asking
 
The premium is €1,400. With your employer covering it, that costs you €500 [i.e. (€1,400 x 50%) - €200].

If you paid it yourself, it’d cost you €1,200 (i.e. €1,400 - €200).

That’s a differential of €700 (i.e. €1,200 - €500).

So OkGo is spot-on, you need to earn an additional €1,400 (i.e. €700 / 50%).
 
Hi all

Thanks very much for your inputs, make sense. So at the minimum around €1,500 anything else is better.
 
JimmyCorkhill said:
Hi all

Thanks very much for your inputs, make sense. So at the minimum around €1,500 anything else is better.
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You can't not have it and I wish that weren't the case and €1500 is the min really. And I still believe it's too much. The whole system really needs a good looking at, because there's money being made and in general that's fine by me, but health insurance we are sliding in to the American way on this.
 
How does tax relief work if you pay for private health insurance? Is it automatically applied or does one have to submit something?
 
It is deducted at source by the insurance company - you only the net amount after the tax relief has been deducted
 
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