Dominic Coyleanswers readers' questions on nursing home fees and redundancy payments.

Tax benefits from sharing the burden of nursing home fees

Q My mother is in a private nursing home which costs €100 day. My father is currently paying the cost of the fees through his own and my mother's private pensions. However, he is only able to claim back some tax relief on his earnings which amount to his private pension.

I am one of three siblings and I would appreciate if you could advise me on how we could better divide out the fees due to the nursing home between us four so as to maximise the tax relief on the fees available.

Mr B.O'N., email

Nursing home charges have become an increasing burden for people throughout the State and can be a source of great distress and hardship for those finding themselves in need of long-term nursing home care and for their partners.

Recognising this, the rules have been changed since the start of last year.

Until that time, the only people able to claim tax relief on such fees were the patients themselves - which was obviously of use only for people who have an income above the tax exemption limit - and any relative able to claim dependent relative tax credit. This credit was available to you in relation to any relative "so incapacitated by old age or infirmity as to be unable to maintain themselves".

However, this was a means- tested credit and, if your parents' income exceeded a certain level - €13,473 in this tax year - you were not eligible.

Since the start of last year, this restriction no longer applies. Any person can now claim any medical expenses that they pay for themselves or on behalf of any other person.

If you are paying the nursing home fees, you can get the tax relief, whether you are in the nursing home yourself or you are paying for another person to be there.

You can claim for fees paid in the same way as you do for other medical costs incurred - by way of the MED1 form, which is available from the Revenue and can be downloaded online.

While small in the context of the sort of fees you may pay on behalf of your mother, it is worth noting that the previous exclusion on claims for the first €125/€250 amount incurred in any given year no longer applies.

Tax relief on medical expenses is available at your highest rate of income tax in the relevant year and MED1 claims can be made up to four years in arrears.

So there is nothing to stop you and your siblings sharing the nursing home cost burden with your father and dividing the cost in a manner that allows each of you to maximise the relief available.

Redundancy timing

I am due to take voluntary redundancy at the end of 2008. I am going back to college in September and will be working reduced hours from then. I am wondering if this will affect either my statutory or non- statutory redundancy payment, i.e. will my payments be based on my full-time pay rate or on the part-time rates that I will be earning on the day I am made redundant?

I understand that my service period will be reduced by a few months but this is not significant as I have 18 years' service.

Mr P.R., Limerick

You need to be careful about this. As you say, you have 18 years' service and, therefore, can expect a reasonable settlement from your employer on being made redundant.

However, you could significantly reduce this by reducing your working hours - and, as a consequence, working pay - of your own volition.

The rules about redundancy payments - at least statutory redundancy payments - are quite specific.

Under the Redundancy Payments Act 2003, you would be entitled to two weeks' statutory redundancy pay for every week of service plus one bonus week.

In your case, this is likely to be close to 37 weeks of pay.

This "statutory" redundancy pay is tax free although any additional ex gratia redundancy pay you may get from your employer may not be.

There is an upper "earnings threshold" when it comes to statutory redundancy pay.

At the moment it stands at €600 a week or €31,200 a year. Regardless of what you earn, this is the maximum weekly amount you will get in statutory redundancy.

However, in assessing redundancy pay - either statutory or ex gratia - the figure that is relevant is the amount you earn at the time you are made redundant.

If you voluntarily reduce your hours in order to return to college this autumn, your redundancy pay will be calculated only by reference to your earnings at the end of the year - which will necessarily be a fraction of your current full-time earnings.

The only exception is if your employer puts you on part-time because they do not have the work available to justify full-time hours.

I would suggest you should hold off on your return to college until the start of 2009 in order to maximise your redundancy payment.

Please send your queries to Dominic Coyle, Q&A,The Irish Times , 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.