Thursday, February 24, 2011

Updated for 2011 - How a Medical Card can save you tax!

Everyone is aware that a medical card entitles you to free GP services, some prescribed drugs and medicines, hospital services and other care services. However, the medical card also entitles holders to other financial assistance such as an exemption to paying school transport charges, state exam fees and assistance with buying school books.

One other major benefit for full medical card holders is tax relief. In 2010 full medical card holders were exempt from paying both the healthy levy and the income levy taxes. However in 2011 the health levy tax was abolished and the income levy tax was amalgamated into the new USC (Universal Social Charge) tax. Initially it appeared that no exemptions or relief to the USC would apply to full medical card holders. However the government was forced to step down on this position and have latterly granted an element of relief to USC for full medical card holders.

The new USC tax is charged as follows:

0% if your earnings are less than €4,004 in the year
2% on earnings up to €10,036
4% on earnings between €10,037 and €16,016
7% on earnings above €16,106

The relief to full medical card holders is that they will only pay 4% USC on earnings above €16,016. This relief does not apply to holders of GP-only and other types of medical cards. An individual who holds a Northern Ireland medical card will be treated as holding a full medical card for the purposes of this relief.

Therefore even if you do not expect to make much use of the medical and health services, it is worth applying for a medical card anyway to avoid the higher 7% rate of USC. Even if you only hold a medical card for one day in the year, you are entitled to an exemption from the higher rate of USC for the whole year. If you obtain a medical card half way through the year, you can be refunded for any USC paid at 7% and instead be charged at the lower 4% rate. These refunds can be issued immediately by your employer via the payroll rather than waiting until the end of the tax year to make a refund application from Revenue.

Are you eligible for a medical card?

Most people who obtain a medical card do so because their income is below a certain level for the size of their family or because the cost of meeting their medical needs causes them financial hardship.

In assessing your level of income, the HSE will take into account your after tax income and also a number of expenses such as your rent/mortgage, childcare costs and the cost of travelling to work. A number of social welfare income sources are disregarded for calculating entitlement to a medical card. They will also take into account any cash, savings, investment or property that you may have (excluding your own home) in determining your entitlement.

Each case is judged on its own merit. The following are the official published rough guidelines of income thresholds but in practice each application is judged on the particulars of the case so if you feel that your income would exceed these thresholds it does not necessary follow that it is not worthwhile applying for a medical card, particularly if it can be demonstrated that the cost of meeting medical expenses will cause you and your family an undue financial burden. The HSE has discretion when deciding whether to grant medical cards to a person whose income is in excess of guideline thresholds.

The following weekly net income guideline thresholds apply to persons under the ages of 66 (i.e. the remaining income that you are left with after taxes and allowable expenses such as mortgage/rent, childcare costs, travel to work etc):

Single person living alone: €184
Married or cohabiting couple: €266.50
Allowance for each of first 2 children under 16: €38
Allowance for 3rd and each subsequent child under 16: €41

If you would like assistance in determining whether you may be eligible for a medical card and thus eligible to an exemption for the 7% rate of USC tax please feel free to contact Fenero.

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