Many people have been wondering if income protection insurance is tax deductible. The answer is yes, you can claim this type of insurance on your tax return and it’s not just for people who are self-employed or unemployed.
Can you claim income protection insurance on tax?
Income protection insurance is a type of insurance that pays a monthly benefit if you are unable to work due to illness or injury.
It can cover you for 90 days after an accident, up until your 65th birthday and/or up until 70% of your previous earnings if disabled for longer than 6 months.
You will be able to claim income protection tax relief on contributions made from 1 April 2018 onwards, as long as they were made within the tax year ending 31 March 2019 (which would include any tax savings from funding your policy)
What is income protection insurance?
Income protection insurance is a type of insurance that pays out a monthly income if the policyholder is unable to work due to illness or injury. In other words, it can help you replace your lost wages if you’re unable to work because of an injury or illness.
Income protection insurance is tax deductible: it reduces your taxable income and reduces the amount of tax you have to pay on your earnings (if any).
Can I claim tax relief on income protection premiums?
Yes is the short answer. Any tax relief is at the marginal rate at which you pay income tax. You should inform the company accountant when you start paying income protection premiums. They can then make the necessary adjustment to your salary.
You can also claim tax relief by accessing the MyAccount services at Revenue.ie.
Permanent health insurance and income protection
You may hear that health insurance will cover all your needs when you are unable to work. Yes it will, but only the bills for your medical condition.
The difference is crucial. Of course it is great to have medical bills paid, but how about your salary? How are you going to pay all the other bills?
You take out an income protection policy to cover your salary when unable to work. Like health insurance you get tax relief on premiums paid, which is very welcome.
Conclusion
I hope this has helped you to understand how income protection insurance can be used. If you would like to know more about any of the above topics or would like an independent review of your current income protection policy, please contact us today!