When a family member needs long term nursing home care, most families are not thinking about tax. Their immediate focus is understandably practical.
- securing a nursing home place.
- understanding what care is available.
- dealing with urgent paperwork.
- managing immediate funding pressures.
The long-term financial consequences usually come later. Often by surprise.
And by the time those questions emerge, important decisions may already have been made.
Questions such as:
- Should the family home be rented?
- Should assets be transferred?
- Is the Nursing Home Loan the right option?
- What happens to rental income?
- Will this affect inheritance tax later?
- Is there tax relief available?
These issues often only surface after Fair Deal has already started. That matters because the Fair Deal Scheme is not simply a nursing home support mechanism — it is a financial assessment system that can affect income, assets, tax exposure and ultimately the value of an estate.
And once care begins, the interaction between Fair Deal and tax becomes much harder to unwind.
Why Fair Deal Should Form Part of Overall Tax Planning
In practice, I often find families only begin looking at the wider financial consequences when they realise that Fair Deal can produce very different outcomes depending on various factors.
- how wealth is held
- whether the person remains in care for a short or a long period
- whether there are rental properties involved.
- whether cash has accumulated.
- whether farm or business relief applies.
Two people with similar overall wealth can face very different Fair Deal costs simply because their assets are structured differently.
That is why this discussion belongs inside broader tax planning, not after the fact.
Why I Usually Present Three Examples Side by Side
One of the most effective ways to explain Fair Deal properly is to put three different financial profiles side by side. As part of the client consultation, I normally present three examples together because it immediately shows how dramatically outcomes can differ even where people appear to have similar overall wealth.
Example 1, Where Fair Deal Works Well
This is often where the client has:
- modest income
- little savings
- a principal private residence only
Here, the 3-year cap on the family home often makes the scheme work reasonably well. After year three, the contribution can reduce significantly, which often makes Fair Deal genuinely beneficial.
Example 2 Where It Depends on How Long Care Lasts
This is where there may be:
- some savings
- a family home
- one rental property
The outcome can change materially depending on whether care lasts one year, three years or much longer.
Example 3 Where Fair Deal Can Be Very Expensive
This is often where clients hold:
- significant savings
- investment assets
- rental property
- farms or businesses where cap relief does not apply
In these cases the scheme can become highly expensive because non principal assets remain fully assessable. This is often where families are surprised to discover that Fair Deal may offer little real protection.
Why Side-by-Side Figures Matter
When these three examples are shown beside each other, one point becomes obvious:
Fair Deal is highly sensitive to asset structure.
The difference is not simply how much wealth someone has.
Renting the Family Home: A Common Example of Tax and Fair Deal Colliding
A very common next step after admission to care is renting the home.
That creates two separate financial consequences.
Under Fair Deal, the former principal residence may still qualify for the three‑year cap. However, while rental income from that home can now be fully disregarded if the statutory conditions for the exemption are met, 80% of the net rental income from any other rented property will be treated as assessable income and can increase weekly Fair Deal contributions.
The 3-year cap protects the value of the home on the asset side, but once rented, the rental income itself remains fully relevant under the income assessment.
The same rental income must also be returned for tax purposes. That means
- rental accounts must be prepared
- annual tax returns continue
- income tax and USC may arise
Importantly, moving into care and renting the former family home does not necessarily remove entitlement to Principal Private Residence relief for CGT purposes, (although the position depends on the facts, of course.).
The point is that the same income can feed into two systems at once and that’s where many families get caught out. The same rental income can increase tax liability and increase Fair Deal contributions at the same time.
That dual impact is often not understood until figures are shown clearly. Many are unaware that tax returns even need to be filed.
The 5-Year Look-Back
One of the most misunderstood parts of Fair Deal is the 5-year look-back on transferred assets. This matters because families often think in straightforward terms.
“If the house, farm, business or cash has already been transferred, it is gone from the assessment.”
That is often not the case. Under the financial assessment, assets transferred:
- in the 5 years before the first application, and
- in some cases after the application date
can still be brought back into the picture for Fair Deal purposes. This can apply to gifts of property, transfers of farms or businesses, cash gifts to children or relatives, and in some cases transfers into trust.
One of the hardest aspects for families to understand is that a transfer can be fully completed for tax and legal purposes, yet still not remove the asset from the Fair Deal calculation. The assumption is often that once ownership changes, the issue is resolved, in practice that is frequently just not the case.
Why This Belongs in Overall Tax Planning
The immediate priority will always be care.
But once care is secured, wider financial planning should follow quickly.
Because Fair Deal decisions often affect:
- tax
- inheritance
- estate liquidity
- future transfers
- family expectations
And these consequences can last for years.
If you are facing a Fair Deal application, understanding the numbers before making property, gifting or tax decisions can prevent costly mistakes later.
Lisa Lokasto 
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