Taxation
- What
to do about Tax when you buy a house
1.
Do I need to tell the tax office if I buy a house?
Yes - you should inform the tax office as soon as possible so
that all correspondence can be sent to your new address.
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2.
Can I claim tax relief on my mortgage?
Yes - if the house is situated in the State, Northern Ireland
or Great Britain and is used as your sole or main residence.
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3. What is a sole or main residence?
A sole or main residence is the residence which is your home for
the greater part of the time. It does not have to be owned by
you e.g. your parents’ residence may also be your sole or
main residence, if you normally live there.
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4. To help with the mortgage repayments,
I intend letting part of my house. What tax relief can I claim
against my personal income tax and against the rental income?
In this situation, part of the mortgage interest may be claimed
as a normal interest credit against your personal income tax.
However, the balance of the interest may not be claimed as a rental
deduction. The mortgage interest applicable to the let part of
the house will be determined on a just and reasonable basis. For
example, the apportionment of the interest may be by reference
to the number of rooms let.
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5. Does residence only mean a house?
No. It also includes:
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6.
Can I claim tax relief on a loan for home improvements?
Yes. You can claim tax relief on a loan used by you to purchase,
repair, develop or improve your sole or main residence or to pay
off another loan (or loans) used for that purpose.
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7.
What can the loan be used for?
The loan can be used for most work done on your sole or main residence
except for money spent on furniture or removable fittings (e.g.
light fittings, curtains, carpets etc.). Examples of what the
loan may be used for are:
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Extensions, purchase/construction of garage, garden shed,
greenhouse etc. |
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Construction
of driveway, path etc. |
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Conversions,
painting and decorating |
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Installing
central heating |
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Rewiring
or replumbing (including bathroom suites) |
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Replacing
or installing windows |
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Purchase and/or installation of burglar/fire alarms |
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Purchase
and installation of bedroom and kitchen units which are affixed
to and become part of the building |
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Treatment
for damp, dry rot, woodworm etc. |
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Landscaping
gardens (including garden walls) |
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Contributions
to group water and sewerage schemes. |
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8.
How much tax relief will I get?
Tax relief is granted on the amount of the interest paid, at the
standard rate subject to the overall limits as set out in Leaflet
IT60 (Home Loan Interest Relief - 2000/2001 onwards).
Special provisions apply for "First Time Buyers". The
period for which relief is available is 7 years (this does not
apply to mortgages taken out before 6 April 1998).
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9. How can I claim the relief?
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.
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 be necessary to claim mortgage interest
relief in the annual tax return, and it no longer appears on your
Notice of Tax Credits. Borrowers who are taking out new mortgages
must complete a TRS1 form. Your lender will supply you with a
TRS1 form. Forms can also be obtained from the TRS Section, Collector-Generals,
Sarsfield House, Francis Street, Limerick.
Further details are available on the Leaflet TRS (Mortgage Interest
Tax Relief at Source).
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10. If I sell my house will I have to pay
Capital Gains Tax?
No. If the house (including grounds of up to one acre) has been
occupied as your sole or main residence throughout your period
of ownership you will be exempt from capital gains tax on the
sale.
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11.
What happens if I had let part of the house or used part of the
house for business purposes?
Full exemption may not be due if only part of the house has been
used as your residence. In this case an apportionment will be
made to arrive at the exempt portion of the total gain and you
will have to pay capital gains tax on the balance.
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12. What happens if my property has "development
value"?
Where your property has development value i.e. if it is sold for
a price higher than its normal current use value then the relief
from capital gains tax as outlined above is confined to what it
would be if the property did not have development value.
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