The mortgage interest relief scheme is now open, allowing homeowners who have borne the brunt of interest rate hikes to potentially claim relief.
Around 208,000 households are understood to be eligible for the relief, which was announced in last October’s Budget, with the potential payments capped at €1,250 per property.
Who is eligible?
The relief is only available to tracker mortgage holders and those on variable rates - not those with fixed rate mortgages.
You must have an outstanding mortgage balance between €80,000 and €500,000 at the end of 2022 in order to benefit.
The relief is only available to those who have seen their mortgage interest bill for 2023 increase on 2022.
Relief will be available on the increased interest paid on the mortgage in 2023 as compared with the amount paid in 2022, at the standard rate of 20% income tax, up to €1,250.
Your Local Property Tax payments also need to be up to date in order to qualify, while the property must also be compliant with planning regulations.
How much will I get back?
This will depend on how much interest you paid in 2023 over what you paid in 2022. A cap of €6,250 applies. That means, based on the standard rate of tax of 20%, you can benefit to a maximum of €1,250 (20% of €6,250).
So, to get the full amount, you will need to have paid an additional €6,250 in interest over the course of 2023 compared with 2022.
As a guide, someone with a €300,000 mortgage outstanding on December 31st, 2022 over 30 years would have paid about €6,800 in interest in 2022 based on an interest rate of 2.5%.
If this increased to 4% in 2023, they would have paid about €11,000. This means a differential of about €4,200 and a tax refund of €840.
If a couple is claiming the relief, the credit will be split between them. This can be divided 50/50 between the couple, where both paid similar amounts. If the contribution to mortgage payments differ between the couple, this will also be taken into account, with the person who paid less interest getting a lower rebate.
What about if the mortgage was paid off in 2023? In that case, it might appear that a higher interest bill was recorded in 2022 – even if the actual rate increased during 2023. In such cases, Revenue says it will “perform all required calculations once provided with the relevant information and will calculate the relief due.”
How can I work out what I paid in interest?
Assuming you meet the other criteria, to understand if you are eligible for a rebate you first need to work out how much interest you paid on your loan in 2022 and compare this with what you paid in 2023.
To do this, you need to get in touch with your lender and ask for an interest statement for both years. These should be readily available and you may already have received such documents – certificates of interest – in the post.
How can I claim?
Once you have worked out that you will be due a rebate, you can go ahead and make a claim.
To do this, you will need to file an income tax return. This has become increasingly standard for PAYE taxpayers in recent years to claim a variety of credits or to seek a balancing statement.
It can be done via the Revenue’s MyAccount service at www.revenue.ie and a lot of fields are pre-filled which makes the process easier.
You are going to need the following documents to file your claim:
- Certificate of mortgage interest for 2022 and 2023
- Confirmation of mortgage balance as of the end of December 2022
For those filing a Form 12 (PAYE workers), these documents can be uploaded to MyAccount via the “Upload Supporting Documents” tab.
What if I am self-employed?
If you are self-employed and file a Form 11 each October/November, you will also be able to claim the credit at that time. However, there may be a bit of a lag.
This is because you typically won’t file your Form 11 for 2023 until autumn 2024, although you can take it into account in your tax calculations, and plan for a reduced advance payment come next October.
Again, you will need the three documents outlined above and you will find a section on claiming the mortgage interest tax credit in the “Personal Tax Credits” section.
When will I get my money back?
As a Revenue spokesman notes, the mortgage interest tax credit is not a real-time tax credit. This means you will not receive the benefit of this relief via increased tax credits; rather, if entitlement to a refund arises on the filing of a tax return, it will be paid directly into your bank account, or sent out to you by cheque if you have not given your bank details in your return.
So, it is more akin to the “cheque in the post” type reliefs of old as opposed to health expenses or the rent credit etc, whereby your tax profile is simply adjusted.
If you have already filed your 2023 income tax return and you think you will be eligible for a claim, you will need to go back and file an amended 2023 return to claim the mortgage interest tax credit.
According to Revenue, you should receive your refund within five days of filing the relevant return.
Details on how to submit a claim for mortgage interest relief can be found online at Revenue.ie.