MORTGAGE INTEREST RELIEF
Tax relief at source (TRS) on secured loans
From 1 January 2002, tax relief for home mortgage interest is no longer given through the tax system but is instead granted at source. This means that your mortgage lender gives you the benefit of the tax relief element on the mortgage interest on behalf of the Revenue Commissioners. Tax relief is granted on the amount of the interest paid, subject to the overall limits.
Your mortgage repayment is reduced by the amount of the tax relief. Your lender in turn claims this amount from Revenue. Any future adjustments in the tax relief (for example, arising from changes in interest rates) will be made automatically by the lender on behalf of Revenue. It is not necessary to claim mortgage interest relief in the annual tax return, and it no longer appears on your Tax Credit Certificate. Borrowers who are taking out new mortgages or who wish to claim for relief due for previous years must apply online at www.revenue.ie.
Unsecured Home Loans
Relief for interest payments made on unsecured Home Loans taken out on or before 31/12/2012 and used for qualifying purposes, i.e. repair or improvement of your sole or main residence, can be claimed from Revenue at the end of the tax year.
If, however, you are paying interest on a qualifying private residence mortgage in excess of the ceiling for relief, listed below, and you are receiving Tax Relief at Source on this interest, there will be no additional relief due in respect of a qualifying unsecured home loan.
Tax Relief at Source – Mortgage Interest Relief
Interest paid on qualifying home loans taken out on or after 1 January 2004 and on or before 31 December 2012 will (subject to the exception below) qualify for tax relief up to the end of 2017 at the following general rates and thresholds.
First time buyers
The tax relief on interest paid on qualifying home loans is 25% for years 1 and 2; 22.5% for years 3, 4 & 5 and 20% for years 6 and 7. The upper thresholds in respect of the amount of interest paid qualifying for tax relief are €20,000 for individuals who are married, in a civil partnership, widowed or surviving civil partner and €10,000 for single individuals. After year 7, the rates and thresholds for relief are as for non-first time buyers.
Non-first time buyers
The tax relief on interest paid on qualifying home loans is 15%. The upper thresholds in respect of the amount of interest paid qualifying for tax relief are €6,000 for individuals who are married, in a civil partnership, widowed or surviving civil partner and €3,000 for single individuals.
Exception 1 (30% rate of relief)
For individuals who purchased their first principal private residence (or second or subsequent principal private residence but only where the first principal private residence was purchased on or after 1 January 2004), on or after 1 January 2004 and on or before 31 December 2008, the rate of tax relief on the interest paid on the loan to purchase that property will, for the tax years 2012 to 2017 inclusive, be 30%, subject to appropriate first time buyers and non-first time buyers threshold.
Exception 2 (certain loans taken out in 2012 and 2013)
Mortgage interest relief is available, in certain circumstances, for the tax years 2013 to 2017, in respect of:
- Interest paid on a loan taken out in 2013 to construct a home on a site, but only where such site was bought by way of a loan taken out in 2012, and
- Interest paid on a loan to repair, develop or improve a home but only where loan approval was in place in 2012 and part of the loan was used in 2012 and the balance used in 2013 on such repair, development or improvement.
In both instances above, in order to qualify for relief, any necessary planning permission must have been in place on or before 31 December 2012.
Loans taken out prior to 1 January 2004
Loans taken out prior to 1 January 2004 are no longer eligible for mortgage interest relief. However, top up loans/equity release loans taken out since 1 January 2004 on these pre-2004 loans may be eligible for mortgage interest relief, provided they adhere to eligibility criteria as listed above.
Note: The relief will be abolished completely by the end of 2017.