Is Mortgage Interest Relief Back?
FOR individuals around the country paying mortgages on certain qualifying properties (mainly on their principal private residence), tax relief has made a comeback for one year only, announced by the Minister for Finance in Budget 2023. This scheme of relief we are told was reintroduced to combat the various hikes in mortgage interest rates throughout 2022 and 2023.
The relief is potentially available for claim for the tax year 2023 i.e. for year ended 31st December 2023. Previously mortgage interest relief was claimed by individuals at source from the relevant banking institution providing the loan. However, in this instance in order to claim the relief a 2023 income tax return must be submitted online by PAYE taxpayers to the Revenue Commissioners on or before 31st October 2024 or in the case of self-employed remitters, by mid-November 2024. It is only those individuals paying tax that will get the benefit of any potential relief available i.e. those under the tax-exempt threshold but paying into a mortgage will not benefit irrespective of their other circumstances.
The relief will take the form of a Mortgage Interest Tax Credit (MITC) and in order to claim same a number of criteria must be met as follows: a) the individuals’ mortgage balance at 31st December 2022 must be between €80,000 and €500,000. b) the credit must be claimed on a qualifying property i.e. i) an individual’s sole or main residence ii) a residential property belonging to the individual’s former or separated spouse or civil partner or a dependent relative
iii) a residential property used to facilitate attendance at a trade, profession, employment etc. For example, a Sligo person has a residential property in Dublin in order to facilitate their work there from Monday to Friday
The above mortgage tax credit is available based on the increase in the mortgage interest paid in 2023 over the mortgage interest paid in 2022. Therefore, the tax credit relief is not available to those individuals on a fixed rate mortgage, although if he/she refixed at a higher rate in 2023 it should qualify. In the main however, the relief is potentially available to those on a variable rate and to tracker mortgage holders.
The increase in the interest paid is subject to a cap of €6,250 and the tax relief is calculated at the standard rate of income tax of 20%. Therefore, the maximum tax credit available for claim per property in 2023 is €6,250 x 20% = €1,250. In simple terms, if Joe Bloggs has a mortgage balance at the end of 2022 of €300,000 and his interest repayments in 2022 were €10,000 and in 2023 they increased to €13,000, the difference of €3,000 x 20% gives rise to a tax credit of €600 claimable by him for 2023.
Where there is more than one eligible claimant on a property the tax credit must be apportioned between the individuals. Certain apportionments are also required where mortgage interest loan repayments are not made for the full 12-month periods in either 2022 or 2023.
To claim the above tax credit an individual must be compliant with Local Property Tax requirements and he/she will be required to provide to Revenue a 2022 and 2023 mortgage balance statement as well as mortgage interest certificates for both 2022 and 2023.