|Ireland Overhauls Property Tax Reliefs|
Ireland is to revamp the range of property tax breaks on offer, with Finance Bill 2016 introducing a Help-to-Buy scheme, increasing interest deductibility for residential landlords, and improving the rent-a-room relief.
The Finance Bill, published on October 20, implements a range of measures announced at last week's Budget. The Budget included a package of 10 housing market support measures.
The Bill provides for the introduction of a Help-to-Buy incentive to assist first-time buyers in obtaining a deposit to purchase or self-build a new-build property. The relief will take the form of a rebate of income tax (including Deposit Interest Retention Tax) paid over the previous four years. A maximum rebate of up to five percent of the purchase price, up to a value of EUR400,000 (USD435,289) will be available. Where new properties are valued at between EUR400,00 and EUR600,000, the maximum relief (EUR20,000) will continue to be available.
The relief will be linked to a mortgage being taken out for a minimum of 70 percent of the purchase price, or, in the case of a self-build, 70 percent of the valuation approved by the mortgage provider. Subject to parliamentary approval, eligibility for the incentive will be backdated to July 19, 2016, the date of the publication of the Government's Action Plan on Housing and Homelessness. It will run until the end of 2019.
The Finance Bill also provides for a phased unwinding of the restriction on mortgage interest deductibility for residential landlords, over a five-year period. Interest deductibility was restricted to 75 percent in supplementary Budget 2009, in an effort to broaden the income tax base during the financial crisis. As a first step, the Government will increase interest deductibility from 75 percent to 80 percent from January 2017.
In addition, the Government will increase the maximum that homeowners can earn tax free through the rent-a-room scheme from EUR12,000 to EUR14,000 for 2017 and subsequent years. The Living City Initiative will be enhanced, to extend the relief to landlords renovating rental accommodation in special regeneration areas, remove the restriction on the maximum floor size of a qualifying property, and set the minimum required expenditure at EUR5,000. The Home Renovation Incentive will be extended for a further two years, until December 31, 2018.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Oct.23, 2016