Last Updated on April 16, 2024 by Ali Hamza
Income Protection Ireland is a great way to ensure that you have a steady income if you suffer from illness or injury, but did you know that it’s subject to tax? The good news is that there are ways of offsetting your income protection premiums against your taxable income. In this article, we’ll look at how much tax is payable on Income Protection (IP) and how you can reduce your bill.
It’s a little-known fact that income protection is subject to tax.
It’s a little-known fact that income protection is subject to tax. If you’re getting a rebate on your premiums, then the amount of tax relief you get will be the same as what would have been saved had you paid for it yourself. To see how much tax someone might be paying on their income protection insurance, we’ll look at how much someone earning €30k with an annual salary of €30k could expect to pay for their cover each month and year.
For example: A person earning €30k per annum (before any bonuses) pays €3,000 annually in income protection premiums which are fully taxed under PAYE. This means they will pay €2,256 in taxes over the course of 12 months or roughly €182 per month (not including PRSI).
What about mortgage protection?
Mortgage protection is designed to protect your mortgage if you lose your job. It is not taxed, and it’s not subject to tax.
If you pay for mortgage protection but don’t want the cover, consider asking for a refund.
How does the government decide what I pay?
The government sets a cap on the amount of tax relief you can claim, based on your age, income and number of dependents. Every year, this cap is reviewed by the Revenue Commissioners and adjusted to take into account inflation. The tax relief available to people over 50 is currently set at €2050 per annum. The amount of income protection tax relief you can get will be based on how much you earn in a year:
- Up to €40,000 – 100% (€1 for every €1 paid)
- Between €40,001 and €60,000 – 50% (€0.50 for every €1 paid)
- Over €60,001 – 10% (€0.10 for every €1 paid).
Is it worth getting an income protection policy if I have to pay tax?
The amount of tax you will pay on your income protection policy depends on your income. If you have a high income, it’s possible that there won’t be any tax relief available for the cost of your policy. In contrast, if you have a low income and need an income protection policy to protect yourself against loss of work due to illness or injury, it’s worth getting one because there are tax reliefs available for this type of insurance.
Taxpayers who spend less than €1,000 per year on things like holidays and clothes can claim back up to €200 from the government as an annual rebate – but those who use all their refund to cover the cost of their new wardrobe might not realize that they could also get tax relief on their monthly insurance premiums too!
You can offset your income protection premiums against your taxable income.
- You can offset your income protection premiums against your taxable income.
- If you pay for an income protection policy, you may be able to get tax relief on it.
- This allows you to keep more of the money that would otherwise go toward taxes in your pocket—and that’s especially useful if you were injured and unable to work!
Do I pay tax on income protection in ireland
Do I pay tax on income protection ? If you receive an income protection payment, the money will be subject to DIRT (Deposit Interest Retention Tax) at the current rate of 39% if you are resident in Ireland.
Your income protection benefit payment will be subject to DIRT (Deposit Interest Retention Tax) at the current rate of 39% if you are resident in Ireland.
Your income protection benefit payment will be subject to DIRT (Deposit Interest Retention Tax) at the current rate of 39% if you are resident in Ireland. This means that your employer must complete a tax return, which they can do online through Revenue’s myAccount service.
Your employer will then deduct the amount of DIT due from your income protection payment, with the remainder being paid directly to you. If your employer does not make this deduction when making payments, it is possible that they could be fined or charged interest on any unpaid DIT amounts.
TIP: If you’re a non-resident, then you may be able to claim back some or all of the tax deducted. You should contact your local tax authorities to find out more.
As a non-resident, you may be able to claim back some or all of the tax deducted. You should contact your local tax authorities to find out more.
TIP: If you’re a non-resident, then you may be able to claim back some or all of the tax deducted. You should contact your local tax authorities to find out more.
