Are You Claiming Medical Expenses on Tax?

Visits to your GP, medicines bought in pharmacies, hospital visits and consultant fees all add up. Most of us spend quite a lot of money throughout the year on medical expenses. But did you know that in Ireland, every taxpayer can claim a refund of 20% on medical expenses that are not covered by either the State or by private health insurance? This applies to both those who are employed and the self-employed. What’s more, you can claim as far as four years back. 

It’s surprising then, that so few of us claim back our medical expenses at the end of the year. Research by taxback.com has found that as little as 20% of the population are doing this. The reasons are varied, says senior tax manager with taxback.com, Barry Flanagan.

Easier than Shopping Online

“Feedback suggests that people believe the process is too complex and time-consuming,” he says. “I can understand why they might think this. Anything to do with tax and form-filling tends to make people's eyes glaze over. But in reality, it’s one of the most straightforward things you'll ever do in terms of personal admin – you could even say it’s easier than shopping online.”

What Can I Claim On?

It’s not just visits to GPs and consultants and the cost of medicines that are covered. Visits to any medically registered professional such as a therapist or acupuncturist are also included. IVF treatment also comes under the tax-back scheme, as does laser eye surgery. While food intolerances are not covered, those who have been diagnosed as coeliac can claim tax back on the food that they buy. This also applies to diabetics who need diabetic dietary products.

Tax can also be claimed on non-routine dental work. Specialised dental treatment such as orthodontics, and the cost of veneers, crowns, bridge work, surgical extraction of wisdom teeth, tip replacements, root canal treatment, periodontal treatment and inlays are all covered.

What About Cosmetic Surgery?

While you can’t ordinarily claim tax relief for cosmetic surgery or procedures like rhinoplasty, breast augmentation or Botox, you can claim relief if you have cosmetic surgery to correct a health issue.

What if I Go Abroad?

Medical procedures abroad are also covered, as long as the cost is for a genuine medical expense and the treatment is provided by a registered practitioner. 

But I Have Private Medical Insurance?

Just because you have private medical insurance does not mean you can’t claim tax back. Any amount that you pay in excess of your cover can be claimed back as a tax expense, and you will receive 20% of the cost.

How Do I Claim Expenses Back?

So how do you go about claiming back your medical expenses without the help of an accountant? “You always have the option of engaging with Revenue directly,” says Barry. “You simply download the revenue app and register at ‘My Account’. You then confirm both your employment and your P60 details and inform Revenue of the amount of unreimbursed medical expenses that you have from the year before.” 

Keep Your Medical Receipts

It’s important to note that you need to have medical receipts at the ready in case Revenue checks up on your claim. “You can always go back to your doctor and ask for a receipt if you no longer have it,” says Barry. “What’s more, many pharmacies now offer a free service whereby they will add up your entire expenses for you at the end of the year.” While it may seem like a small amount of money to be claiming, it’s amazing how much medical expenses add up to. Taxback.com estimate that their average medical claim for a year is €995 per person. Think about it: that’s almost €1,000 that could be weighing down your pocket!

This is the latest in our series of articles that consider the financial challenges for clients at a specific stage in life. This time we’re looking at people who are in their 50’s. This is a really important stage in your financial life as it is often the time in life of maximum income and the greatest opportunity to really build your wealth.

Here are some thoughts on how you might approach your finances differently in the second half-century of your life.

Accept advice and help

We very definitely put this one at the top of the list, as there are some crucial strategies to implement correctly at this stage in your life. If you should make major mistakes in relation to your retirement finding during your 50’s, you probably won’t have enough time on your side to fully recover from them. There are also significant tax saving opportunities available to you in retirement funding,  investment structures and exiting your business. Each of these needs to be considered carefully. This is also a critical time to start thinking about how you will effectively decumulate assets after you stop working and also to plan the transfer of your wealth to the next generation in a tax efficient way. 

Each of these (and more) are important strategies to get right and each of them require careful advanced planning. We modestly suggest that you accept our help in helping you to maximise the financial opportunities open to you. At the end of the day, research has shown us time and time again that clients who accept advice and help from experts achieve better outcomes.

Have crystal clear goals

Now is not the time to muddle along and hope for the best. We encourage you to take a step back from your bank and investment statements and really look into the future. What does your desired life look like for the next 20/30/40 years? When you have this picture clear in your head, then it’s our job to show you what you need to do to achieve it. We’ll create the plan and then work with you every year to ensure you achieve your dreams. Without the clarity of your dreams and objectives, are you just drifting along to see where life takes you?

Don’t touch bonuses

Now we start getting very practical. Hopefully at this stage of life your monthly income exceeds your expenditure. You probably have the back broken of your mortgage or even your mortgage may be behind you. Bonuses that you get in work or from inheritances etc. are very welcome, but in truth probably not necessary to fund your life today. So don’t use them for today, give yourself more options in the future. If invested wisely, they might help you to retire earlier, buy a place in the sun or (not quite as exciting) pay for long-term care later in life. Do you really need that 3^rd holiday this year or the very top of the range car?

Maximise your pension contributions

Once you hit your 50’s, you can get tax relief on your own pension contributions at your marginal rate on 30% of your net relevant earnings. Once you hit 55, this rate increases to 35%. While there is a maximum annual amount of earnings of €115,000 for which tax relief will be given, if you have spare cash there are great tax saving opportunities here. Of course if you have your own business, there are opportunities for even greater tax savings through making pension contributions. As you generally cannot claim relief for years gone by and as the radio ad says, “Once they’re gone, they’re gone”, don’t let these opportunities slip through your fingers.  

Pay attention to your investments

As mentioned earlier in this piece, your 50’s are a time for continued wealth accumulation. It’s really important that you work very closely with your adviser to ensure that your investments reflect your timeframes and your appetite for risk. As mentioned earlier, this also should be done with one eye on your likely investment strategy after you stop working. Are you investing today with an end date of your retirement date in mind, or are you likely to continue investing after retirement and instead have one eye on the future decumulation of your assets? Your investment time horizon may not be 10-15 years, instead it might be 30-40 years still...

Keep the kids moving!

Yes we all want to help our kids and we’re not advocating that you throw your kids out on to the streets once they are through college... But at the same time, be careful about the level of support that you give to them. Support them fully within your means, but don’t let their financial needs derail your own goals. Otherwise financial problems will just stack up for you in the future, and these may also come back to haunt your kids.

Your 50’s are a time of great financial opportunity. Please give us a call and we will help you to make the most of these opportunities for you and your future.

We await with interest each year the claims statistics from the leading protection providers in the Irish market. Irish Life annually issue very insightful and detailed information about their claims (as do other providers), and we’ve taken the opportunity to dig a little into the claims data from their Retail division for 2021. 

We never forget that the whole purpose of insurance is to pay claims to those who are unfortunate enough to require them. This is why we all insure ourselves against the financial impacts of death, an illness or an accident. The Irish Life data demonstrates how claims sit at the heart of their business – they paid out €171.9 million in death, terminal illness, specified illness cover, income replacement and rider benefit claims during 2021, under 3,453 plans. This equates to €3.3 million per week.

We were particularly interested to see how the pandemic has affected claims. While the volume of claims paid by Irish Life during  2021 were on a par with those paid during 2020, overall claims numbers paid were almost 20% lower than 2019 (i.e. pre pandemic). Death claim volumes paid during 2021 were lower by 11% and specified illness were lower by 18% on 2019.

So, protection claim volumes paid during 2021 were still substantially down because of the pandemic. This is probably due to the reduced participation with national screening programs, decreased availability of medical investigations, people not attending GP’s or specialists as often, and delayed legal processes during lockdowns. However, over the latter part of 2021 and into 2022, it does appear as if new claim notifications for death and Specified Illness Claims (SIC) have started to return to pre-pandemic levels.

Death Benefit Claims

Irish Life paid 132 COVID-19 related death claims to the value of €7.9 million during 2021. The average amount paid was €59,000. While the median age was 70 and most had a pre-existing medical condition, they did pay seven claims to lives under age 50. Typically, the underlying conditions were cancer, heart disease, diabetes, respiratory illnesses and dementia.

Sadly, Irish Life also paid 32 Terminal Illness (TI) claims during 2021 – this is where a death benefit is paid out on the diagnosis of one from a list of terminal illnesses.  The total value of these was €4.1 million, with the average claim amount being just over €120,000 and with average plan duration of 13 years. The average age of claimants was only 51 for women and 56 for men. The two biggest cause of TI claims in 2021 were for malignant brain and lung cancers.

Specified Illness Claims

The biggest individual medical causes of specified illness cover claims were: 134 breast cancers (18% of total claims paid, which is up on 2020), 73 heart attacks (including 10 on female lives), 72 prostate cancers and 48 strokes. Overall, 78% of SIC claims on female lives were for malignant cancers. Malignant cancers were also the biggest cause of any SIC claims between the ages 51-60.

62% of claims were for lives aged between 41 and 60. So again, key age ranges where our customers will very likely have families and financial commitments.

In summary, while the overall volumes of Irish Life claims paid are not yet back to pre-pandemic levels, this has already started to change.  We remember every time we read these figures that behind every claim is a person or family that needed the financial protection of the products we recommend. That’s the ‘moment of truth’ for us as an advice profession and an industry as a whole.