FIRST-time buyers got a boost from the Budget when Finance Minister Brian Lenihan hiked the amount of tax relief at source they can claim for paying a mortgage.
But existing homeowners who have their mortgages for more than seven years lost out when the mortgage interest relief they can claim was reduced.
So how will the changes impact first-time buyers and those with a mortgage for more than seven years?
How it works
Known as mortgage interest tax relief at source, or TRS (tax relief at source) by the Revenue Commissions, tax relief for home mortgage interest is granted at source by the mortgage lender.
The lender gives the relief either as a reduced monthly mortgage payment or a credit to the borrower's funding account.
Anyone who has a qualifying mortgage on their main residence is entitled to apply to Revenue to have the relief on the interest they pay on their mortgage applied at source by their lender.
A qualifying mortgage is a secured loan used to purchase, repair, develop or improve an individual's sole or main residence, which must be situated in the State.
You can also claim relief for a mortgage paid for a separated/divorced spouse and/or a dependent relative for whom a dependent-relative tax credit is claimed.
But TRS cannot be claimed for an investment property, according to the Revenue Commissioners.
TRS is calculated on the interest paid on a qualifying mortgage subject to certain ceilings or upper limits.
For first-time buyers (from year one to seven of the purchase) the level of the ceiling for a single person is €10,000, and €20,000 for a couple or widowed person.
For non first-time buyers, the ceiling for a single is €3,000, and €6,000 for a couple.
The upper limits for first-time buyers apply for the tax year in which the mortgage is taken out, plus six subsequent tax years. The application form used to claim mortgage TRS is a TRS1 form. You can complete this form online at www.revenue.ie/trs/mortgage/.
First-time buyers
From January 1, 2009, the rate will increase from 20pc to 25pc for the first two tax years of the mortgage and to 22.5pc for the following three years. The rate falls to 20pc in years six and seven.
A single first-time buyer in year one will qualify for a maximum of €208.33 a month (€10,000 x 25pc, divided by 12), up from a maximum of €166.66
A couple who are paying enough interest will be able to claim up to €416.66 a month from January, according to calculations by Hooke & MacDonald economist Geoff Tucker.
In years three, four and five a single person will be able to claim up to €187.50 a month (€375 a month for a first-time buyer couple).
Mr Lenihan said the changes would apply to those who purchased from January 1, 2005.
In other words, first-time buyers as of that date get the higher relief. The Revenue has confirmed that there will be no backdating of the higher relief.
For example, someone who bought a house in 2005 would be in year five from next January, which means they will get mortgage interest relief at 22.5pc. In the following two years their relief will be at 20pc.
Existing owners lose
The bad news for existing homeowners, who have had their property for more than seven years, is that the mortgage interest relief they can claim has been cut from 20pc to 15pc.
The most interest in a year that a single can claim against is €3,000, with €6,000 the ceiling for a couple.
The maximum available relief for a single non first-time buyers falls from €50 a month to €37.50 a month (€3,000 x 15pc, divided by 12).
In the case of a non first-time buyer couple the maximum amount drops from €100 to €75 from the new year.
- IRISH INDEPENDENT, Charlie Weston
