Dáil Éireann debate -
Thursday, 7 Mar 2002

Vol. 550 No. 2

Written Answers. - Tax Relief.

Noel Ahern

Question:

233 Mr. N. Ahern asked the Minister for Finance the situation regarding mortgage relief and new investor relief on rented accommodation; if mortgage relief is available to someone who is officially house sharing; if a person who is house sharing can claim investor relief under the new provision for all or part of a house; the way in which the situation would be dealt with concerning a case where parents have given a ?100,000 loan towards a house; if the parents can claim investor relief; and if a person who bought a second house can off-set loan interest plus a personal residence mortgage against rental income. [8297/02]

Minister for Finance (Mr. McCreevy):

It is assumed that the term ‘new investor relief' refers to the restoration of tax relief for interest on money employed in the purchase, improvement or repair of rented residential property. The relief is allowed in arriving at the profit from the rent, which is the taxable amount. This measure is included in the Finance Bill, 2002 and will apply to interest accrued from 1 January 2002.

Income tax relief is available in respect of mortgage interest paid in respect of loans taken out for the purchase, repair, development or improvement of an individual's sole or main residence. The relief is available at the standard rate of tax – 20%. The maximum relief available is:

First Time Buyers (for first 5 years of assessment)

Married/Widowed	€6,350
Single	€3,175
All others
Married/Widowed	€5,080
Single	€2,540

Since the 1 January 2002 income tax relief on secured mortgages is given through the tax relief at source system.

Where an individual is house sharing, i.e. is in receipt of payment for the use for the purposes of residential accommodation of a room or rooms in his sole or main residence for a year and the gross receipts do not exceed €7,620 in a year, the income from such receipts is treated as nil for tax purposes. This is usually referred to as the rent-a-room scheme. As the person is not charged tax on such rents, the question of a deduction for interest on borrowings does not arise against such rents. Provided the ceiling of €7,620 in gross receipts from the rent-a-room is not exceeded, tax relief for mortgage interest, which is now given at source by the lender, is not affected.

If the payments for house-sharing received by the individual exceed €7,620 in a year, the individual would in effect be taxable as an investor on the profits from such payments and would be entitled to deduct a proportion of the interest on money employed in the purchase, improvement or repair of the property in arriving at such profit. The proportion would be based on the part of the property which is let. Mortgage interest relief at source could be claimed for the balance of the interest.

Where parents had borrowed to finance a loan to the child for the purchase of the house by the child, no tax relief would be available to the parents for the interest on such borrowings. A person who borrows, on the security of their existing house, to purchase a property for letting, would be entitled to relief for the interest on such borrowings in arriving at the profit rent from the let property. Interest on a loan which was used for some other purpose, for example to finance the purchase of their principal private residence, cannot be offset against the rental income.