Q&A Dominic Coyle: Claiming relief on nursing home fees

I have been paying nursing home fees on behalf of my mother since last August and now wish to claim tax relief as part of my normal annual PAYE tax claim.

During last year my mother gifted €100,000 to each of us three children and that is what I have been using to pay the fees (€28,500 for 2015).

My question is: how do I indicate to Revenue that the money transferred to me was indeed gifted, with the amount over €3,000 forming part of my lifetime limit on gifts or inheritances from a parent, and not that I was simply reimbursed for paying the fees?

Ms PV, email

I don’t see why you do. In general, you will claim for medical expenses – including the cost of nursing home care paid by you – on a Med 1 form. This is an annual submission and covers most non-routine out-of- pocket medical expenses not already covered by other schemes.

The thing is that Med 1 allows you to claim tax relief against income tax already paid through the PAYE system. And it is particularly valuable for nursing home costs because you can claim relief at your highest rate of tax. Other Med 1 claims, in common with most tax relief these days, can be claimed only at the basic 20 per cent income tax rate.

The key issue here is that you are paying the fees out of your income. There is nothing to determine whether it is from gifted income or from earned income on which tax has already been paid. The Revenue has determined that taxpayers are entitled to claim for medical expenses, including nursing home costs, so I would leave it at that.

Nowhere on the Med 1 form must you indicate that you have received a gift. It's not relevant to that form.

Self-assessment

If you were self-employed, you would need to fill out annually a Form 11 self-assessment of liability to tax. In this form, you would be required to indicate via a tick on a box that you have received a gift in the year in question, but nothing else. Nowhere on Form 11 must you state the size of the gift.

For PAYE taxpayers, particularly those with other income, Revenue may seek you to fill out a Form 12. This is essentially the same as Form 11 but geared at PAYE taxpayers. Again, you must indicate if you have received a gift in that tax year but nothing else – no details about its size or whatever.

One thing to note: while Form 12 is only supposed to be relevant for people with “other” income (rents, etc), Revenue does occasionally send it out to ordinary PAYE taxpayers, including those claiming Med 1. If that happens, you should clarify with Revenue that you have no relevant income to file. If they push it, you simply give them details of your PAYE income as set out on your P60 for last year.

Only if the gift touches or exceeds 80 per cent of the relevant gift tax/ Capital Acquisitions Tax threshold must you notify the Revenue. In such cases, it is up to you to do it proactively, not to wait for the Revenue to request details. And, of course, there’s a form for that: Form IT38.

Category A gifts

Any gifts from a parent to a child fall within Category A. The threshold on gifts from a parent to a child is now €280,000 but, if you received the gift before last October’s budget, the threshold at the time was €250,000. Eighty per cent of €250,000 is €200,000, so you have no requirement to give any details the gift received from your mother as it falls well short of this, with one exception.

Gifts are aggregated, both with previous gifts and with inheritances. Thus, if you previously received a gift from your mum (or your dad), it must be added to the latest gift to calculate where you stand on the threshold. Equally, if your father has died and you received an inheritance from him, that too would have to be taken into account.

Incidentally, gifts from siblings, uncles/aunts, grandparents and other “linear” relations fall into a separate category with its own (lower) threshold.

As you say, you are entitled to the €3,000 small gift exemption.

So what does all this mean for you? Claim the tax relief owing to you via a Med 1 Form. Revenue imposes no obligation to explain further, so it is not necessary. That’s all – unless your mum’s gift brings you over the Category A threshold when aggregated with other gifts and inheritances from your parents.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes. com. This column is a reader service and is not intended to replace professional advice.