Mortgage interest relief is a tax relief based on the amount of qualifying mortgage interest that you pay in a given tax year for your principal private residence (your home). A tax year means the period from 1 January to 31 December.
Mortgages taken out after 31 December 2012 do not qualify for mortgage interest relief.
Mortgage interest relief is administered via Tax Relief at Source (TRS). This means that your mortgage lender gives you the benefit of tax relief on the amount of mortgage interest paid. The lender does this by reducing your mortgage repayment by the amount of tax relief you are entitled to in each tax year. Any amendments to this tax relief - for example, if there is a change in interest rates - are made automatically by your lender.
You do not have to be earning a taxable income to qualify for mortgage interest relief.
Normally, you do not claim mortgage interest relief in an annual tax return because it is given directly to you by your mortgage lender. Tax relief can still be claimed from your Revenue office for interest paid on non-secured loans used for qualifying purposes.
Mortgage interest relief will be abolished entirely after 31 December 2017.
The Finance Act 2012 made the following changes to the rules on mortgage interest relief:
For you to qualify for tax relief on mortgage interest repayments, the interest must relate to money that you have borrowed to purchase, repair or improve your sole or main residence. For example, you cannot claim mortgage interest relief for interest on a loan used to buy a holiday home or investment property, but you can claim it if the loan is to extend or improve your main home.
If you work and pay taxes in the UK (including Northern Ireland) but your sole or main residence is in the State, you can claim relief on the interest you pay on the mortgage. You will need to have a Personal Public Service Number (PPSN) in order to claim the relief.
Relief is also subject to upper limits, which will depend on your personal situation and whether you are a first-time buyer - see 'Rates and ceilings' for details.
Your entitlement to mortgage interest relief depends on the relevant start date, as follows:
Your entitlement to mortgage interest relief was dependent on the loan being drawn down and used in the purchase, repair, development or improvement of your principal private residence in 2012. It was not necessary to have made the first repayment on the loan in 2012. Interest accrues on the loan from the date the loan is drawn down and this interest qualifies for mortgage interest relief even if the first repayment was made in January 2013.
‘Drawing down’ a mortgage refers to the transfer of the money from the mortgage lender to you or to your solicitor. The money must have been paid to the seller or builder by 31 December 2012 for it to be considered as used in the purchase, repair, development or improvement of your principal private residence in 2012.
While the legislation governing mortgage interest relief provides that the relief be granted based on the amount of interest paid, most lenders operate the relief based on the amount of interest charged to an account. This had little impact up to recently. However, in response to the growing incidence of mortgage arrears, it is intended that all lenders will operate on an interest-paid basis from the earliest possible date.
In the meantime, Revenue is working with mortgage lenders to identify accounts on which interest has not been paid for a period of 6 months or more. Tax Relief at Source (TRS) will be ceased on these accounts and will only be restored when 3 consecutive payments have been made and the borrower re-applies for the relief.
As regards interest-only arrangements, people who are only paying the interest portion of their mortgage are still entitled to TRS and will continue to get it if they meet the qualifying conditions.
There are different rates and ceilings for first-time buyers and for people who are not first-time buyers. For first-time buyers only, rates of relief are reduced over the lifetime of the mortgage. The Revenue Commissioners have published detailed tables showing the rates and ceilings that apply in various circumstances.
You are a first-time buyer for the purposes of mortgage interest relief if you are in the first 7 tax years of receiving the relief.
Mortgage interest relief for first-time buyers in 2012 is 25% for the first and second tax year in which you pay mortgage interest. You will get relief of 22.5% in tax years 3, 4 and 5. After that you will get relief of 20% but 2017 is the last year in which mortgage interest relief will be available.
For example, if you were entitled to relief for the first time in 2009, you will still be a first-time buyer in 2015. However, in the 8th year of your entitlement to relief (2016 in this case) the lower rate of 15% will apply as you will no longer be a first-time buyer. The ceiling (see below) will reduce to €3,000/€6,000.
Special 30% rate
For mortgages taken out by first-time buyers between 1 January 2004 and 31 December 2008, the Finance Act 2012 provides for a special rate of mortgage interest relief of 30% for the tax years 2012 to 2017.
The rate of mortgage interest relief is 15% if you are not a first-time buyer.
The amount of mortgage interest on which you can get relief is subject to upper limits or ceilings. The ceiling that applies to you depends on whether you are single; married; widowed; in a civil partnership; or a surviving civil partner.
The following are the ceiling amounts for tax years 2011 and 2012:
|Single||Widowed/Surviving civil partner/Married/in a civil partnership|
To calculate what this is worth to you each year, get the correct percentage of the ceiling amount that applies to you.
For example, married first-time buyers on the second tax year of their mortgage get relief at 25% of €20,000. Therefore, the maximum amount by which their yearly mortgage interest can be reduced is €5,000.
Married non-first-time buyers on the second tax year of
their mortgage get relief at 15% of €6,000. Therefore, the maximum amount
their yearly mortgage interest can be reduced by is €900.
You should register online for mortgage interest relief as soon as you have paid the first instalment of your mortgage.
If you cannot use the online facility, you can contact the TRS Helpline on
1890 46 36 26 or email email@example.com for assistance.
Revenue will provide you with more information about Tax Relief at Source (TRS) for Mortgage Interest Relief.
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.