If you’re self-employed, it may be tempting to think that income protection insurance is too expensive. But there are ways to reduce the cost of this important insurance. By claiming your income protection tax deduction on your tax return, you can save up to $1,500 per year in tax relief. This can make a huge difference when faced with the cost of paying for an income protection policy that provides only partial coverage or none at all
Learn how income protection tax breaks can help you save on income protection
Income protection tax breaks are a great way to help you save on income protection insurance.
Income protection tax breaks work like this: if you have an income protection policy, it means that your employer pays for you to receive medical treatment when needed. This could be anything from knee surgery to chemotherapy, or any other type of treatment that your doctor recommends for an injury or illness that’s caused by accidents at work (for example).
The way these policies usually work is simple: the company pays up front for the treatment and then they take care of paying back any money they’ve lent out over time through payroll deductions (essentially taking a percentage off every pay cheque).
How does income protection tax work?
You can claim tax relief on income protection premiums if you are paying for them.
If your policy is exempt from NI, then it does not qualify for tax relief. In this case, you will only get back what you have paid in premiums (excluding any interest). If your policy is non-exempt and has been taken out by someone who was liable to pay Class 2 NICs, then it will be free of NI and repayments can be made at any time during the year as long as no other claims have been made on a person’s behalf within that same period.
Income protection premiums are usually fully tax deductible.
Income protection premiums are usually fully tax deductible, but there are some exceptions.
- You can claim for the full cost of your income protection policy as a business expense. This includes any premiums paid, interest paid on loans taken out to pay for your policy and any other costs associated with getting it underwritten and issued by an insurer.
- If you’re self-employed or run a small business that has no employees, then you can claim only 80% of the cost of your monthly premiums – or 50% if they exceed $1 million per year (for those over 65). However, if you have employees who work at least 20 hours per week and earn more than $60 000 annually each year (or have been since before January 1st 2000), then they qualify as employees rather than freelancers/contractors so their contributions must be included in their gross income before calculating how much comes back through PAYG withholding tax
Do I need to claim this deduction on my tax return?
You can claim your income protection insurance premium as a tax deduction if you meet the criteria. You need to keep records of your income protection premiums, so that we can check that they’re eligible for this deduction.
If you don’t meet these criteria, then any deductions claimed on your tax return will be disallowed by HMRC (the tax authority).
How do I claim my income protection insurance as a tax deduction?
Income protection insurance is a form of insurance that pays out if you become disabled or lose your job. It can be bought by an individual, or by a company as part of its benefits package.
Tax deductions for medical expenses are available to those who have been diagnosed with cancer; this includes treatment costs, medication and travel arrangements. The amount you can claim depends on how much income protection policy cover you hold and what its value was at the beginning of 2018 (the year when it came into force). If your policy is fully paid up then you can claim an annual tax deduction from €2,500 to €5,000 per year between now and 2021 – subject to certain conditions being met each year.
When do I need to claim my tax deduction?
You can claim a tax deduction for income protection insurance premium payments made during the financial year if they were made:
- Before 1 July 2016 – and up until 30 June 2017.
- On or after 1 July 2016 – and up until 30 June 2018.
Is your income protection insurance policy providing the best possible value for money?
But is your income protection insurance policy providing the best possible value for money?
A lot of people are paying too much for their cover, because they don’t understand what they need and how much it will cost.
There are three ways that this can happen:
- You may be paying too much by buying too little coverage. For example, if you only have enough money to buy a single-person policy (which covers just one person), then this could mean that your spouse could be left unprotected in case something happens to him or her – even though family members need protection together!
- Or perhaps you’ve purchased some kind of ‘specialist product’ from an insurer who specialises in offering specialist travel cover – but there isn’t really any evidence that these types of policies are any better than standard ones when it comes down to protecting family members against financial hardship caused by illness/disease/accident etc…
Income protection is a valuable benefit and can be used to help you avoid the financial stress of ill health. The tax benefits of income protection insurance are also worth considering, as they can help you save on your premiums after making a claim. If you’re looking for more information about how these deductions work or if there are any tax issues that might affect your decision then we recommend contacting us today for advice.