Tax Relief for Rent Paid
Info
If you live in private rented accommodation in Ireland and pay income tax, you may be eligible for tax relief on part of your rent.
Rules
In order to claim tax relief, you must be paying rent for private rented accommodation which is used as your sole or main residence. This includes accommodation such as a bedsit, flat, apartment or house.
You cannot claim tax relief for rent paid as follows:
To a local authority or a State Agency
Rent paid under a lease agreement for 50 years or more.
Landlords or agents living in Ireland
If your landlord or agent is resident in Ireland, a receipt for rent you have paid must be provided if and when it is requested by Revenue. This rule applies regardless of whether you pay your rent directly to the landlord or to an agent on behalf of the landlord. Each receipt must show the following:
- Landlord's name, PPS Number and address
- Amount of rent which you have paid
- Period of time covered by the receipt.
Landlords living outside Ireland
If your landlord lives outside Ireland and you pay rent directly to them or to their bank account located in Ireland or abroad, you must deduct tax at the standard rate (20%) from the gross amount which you pay. This deduction is not your tax relief, it is tax payable to Revenue from your landlord's income. For example, if your landlord lives in Germany and you pay him/her gross rent per month of €1000. Firstly, calculate the amount of tax to be deducted (€1000 x 20% = €200). Now deduct the tax due from the gross rent you pay (€1000 - €200 = €800 ). Your monthly rent paid to your landlord is €800 per month. Your monthly return paid to Revenue is €200 per month.
You must account for the tax you deduct by making a tax return to Revenue and paying over the tax you have deducted from your landlord. You can make a return immediately but in practice this rarely happens. Instead, if you are a PAYE employee you can pay over the tax deducted when you submit your annual Tax Return Form 12 to Revenue . If you pay tax by self-assessment, you can account for the tax you deduct in your annual self-assessment Tax Return Form 11 which you send to Revenue.
At the end of the year you must give your landlord a completed Certificate of income tax deducted - Form R185 (pdf). If you fail to deduct tax from rent you pay to a landlord living outside Ireland will mean that you (and not the landlord) will be liable for any tax which should have been deducted.
Rates
Tax relief at the standard rate of 20% on private rented accommodation is available whether your landlord lives in Ireland or abroad. In 2008 the tax relief on rent is as follows (also applies in 2009):
|
Age |
Single Tax Allowance |
Married/Widowed Tax Allowance |
|
Aged under 55 years (max. relief) |
€2,000 |
€4,000 |
|
Aged over 55 years (max. relief) |
€4,000 |
€8,000 |
To calculate what this is worth to you each year after tax, you multiply the tax allowance amounts above by 20%. So, for those aged:
Under 55: the maximum amount a single person under 55 can get is €400 (€2,000 x 20%) for rent paid in 2009. The maximum amount a married couple or widowed person can get is €800 (€4000 x 20%) for rent paid in 2009.
Over 55: the maximum amount a single person over 55 can get is €800 (€4,000 x 20%) for rent paid in 2009. The maximum amount a married couple or widowed person can get is €1,600 (€8,000 x 20%) for rent paid in 2009.
How To Apply
Whether you landlord lives in Ireland or abroad, to claim rent relief you must complete Form Rent 1 (pdf) and send to your tax office. (Copies of the form are also available from your local tax office). If you have any difficulty completing the form or supplying any of the information requested, staff in your tax office will be happy to help you.
Mortgage Interest Relief
What is Tax Relief At Source (TRS)
Since 1st January 2002, tax relief for home mortgage interest is given at source [tax relief at source – TRS]. From that date TRS can be claimed in respect of qualifying loans i.e. a new mortgage, a top up loan, a home improvement loan, a re-mortgage or a consolidation of existing qualifying loans, secured on the deeds of your main residence. Mortgage interest relief is given, by your lender, either in the form of a reduced mortgage payment or a credit to your funding account. At the end of 2008 there were over 562,000 loans in receipt of TRS, at a cost of €705 million.
What is a Qualifying Loan for TRS
A qualifying loan for the purpose of mortgage TRS is a secured loan, used to purchase, repair, develop or improve your sole or main residence, situated in the State. With effect from 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers. You can claim mortgage tax relief in respect of the interest charged/paid on your main residence. You can also claim mortgage tax relief in respect of a mortgage paid by you for your separated/divorced spouse, and a dependent relative (i.e. widowed parent, elderly relative) for whom you are claiming a dependent relative tax credit. However, your mortgage TRS entitlement cannot exceed the maximum TRS allowance.
Switching lender or mortgage type to achieve a better interest rate does not equate to a new loan. However, moving home and taking out a new mortgage for this home with a new or existing lender is eligible for relief for 7 years from the date of first payment on the new home loan.
Changes to Mortgage Interest Relief since 1st January 2009
From 1st January 2009, the rate of tax relief for first time buyers increased from 20% to 25% in years 1 and 2 of the mortgage and to 22.5% in years 3, 4 and 5. This change benefits first-time buyers who purchased since 1st January 2005.
The rate for years 6 and 7 remains at 20%. First time buyers relief ends after year 7. The relief for non first time buyers is reduced from 20% to 15%.
With effect from the 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers.
How Have These Changes Affected Me
Changes from 1st January 2009
From 1st January 2009, your relief is calculated based on your status as a First Time Buyer, and also how many years you have been a First Time Buyer, or your status as a non-First Time Buyer, as appropriate. You can only get relief on the interest charged/paid on your mortgage.The actual relief you receive is dependant on the ceiling or upper limit allowable.
For instance, if you are single and a first time buyer who became a First Time Buyer in 2009 or 2008, you will be entitled to mortgage interest relief on interest paid on your mortgage up to an upper limit or ceiling of €10,000 at a relief rate of 25%. If you are a FTB in your 3rd, 4th or 5th year as a First Time Buyer, you will be entitled to mortgage interest relief on interest paid on your mortgage up to an upper limit or ceiling of €10,000 at a relief rate of 22.5%. If you are a FTB in your 6th or 7th year as a First Time Buyer, you will be entitled to mortgage interest relief on interest paid on your mortgage up to an upper limit or ceiling of €10,000 at a relief rate of 20%. However a single person who is no longer a first time buyer is entitled to mortgage interest relief on interest paid on his/her mortgage up to an upper limit or ceiling of €3,000 at a relief rate of 15% on any NEW loan or Top Up taken out from 1st May 2009 or in the last 7 years for a maximum period of 7 years.
How Do I Apply for Mortgage Interest Relief
The most efficient way to claim mortgage interest relief on your home mortgage is to complete the application form online. It is sufficient for a married couple to submit their details online on the same application or by completing one TRS1P application form. In all other cases of joint borrowings, each claimant should submit their details online separately or complete separate TRS1P application forms. Apply Online
When Should I Apply for TRS
You should apply online or complete the TRS1P application form as soon as you have commenced repayments on your loan. However, you may need to re-apply to Revenue in certain circumstances:
if you take out a top-up mortgage on your main residence
if you transfer/switch lender and the date the original loan was taken out is within the last 7 years. The period of 7 years for the purposes of calculating the entitlement to relief begins from the date the original loan was taken out with your lender. Switching lender or mortgage type to achieve a better interest rate does not equate to a new loan. However, moving home and taking out a new mortgage for this home with a new or existing lender is eligible for relief for 7 years from the date of first payment on the new home loan
if you re-mortgage with the same lender or
if you take out a mortgage in respect of your separated/divorced spouse and/or dependant relative.
If any of these circumstances occur, you should apply as soon as possible after repayments have commenced on your loan. Apply Online
Do I Need to Apply for TRS Every Year
No. If your mortgage remains the same, your lender will continue to apply the relief automatically each year.
How Do I Claim for Previous Years
The Finance Act 2003 introduced a new time limit for claiming tax repayments. From 1st January 2005 the overall time limit is being reduced from 10 years to 4 years. Claims made on or after 1st January 2005 will be subject to the 4-year time limit.
In 2009, to claim for years 2005 to 2008 (inclusive), you will need to complete a Claim for Prior Year(s) Mortgage Interest Relief - TRS1P form (PDF, 169KB) and send it to: Office of the Revenue Commissioners, Collector Generals Division, TRS Section, Sarsfield House, Francis Street, Limerick (Freepost). Any claims for 2009 cannot be dealt with until 2010.
I own two properties which I split my time between for work commitments. Can I claim TRS on both
No. In this case, you should nominate which property is your principal private residence and claim TRS on that mortgage