Tax Relief for Mortgage Interest Paid on a Home Loan
Step by Step Guide
Apply On-line for Tax Relief at Source
- Section 1: What is Tax Relief for Mortgage Interest on a Home Loan?
- Section 2: What is a Qualifying Mortgage?
- Section 3: What changes have arisen from the Budget Announcement on 6th December 2011 [Budget 2012]
- Section 4: If I took out my first mortgage between the years 2004 to 2008 what do I need to do?
- Section 5. What is my position if a took out a loan after 2008?
- Section 6: What is a year of assessment for mortgage interest relief?
- Section 7: How do I claim mortgage interest relief?
- Section 8: What type of loan does NOT qualify for mortgage interest relief?
Section 1: What is Tax Relief for Mortgage Interest on a Home Loan?
Tax relief for mortgage interest on a home loan is tax relief given to mortgage holders based on the interest paid on a qualifying mortgage on your home i.e. a new mortgage for a home, a top up loan used for the purposes of developing or improving your home, a separate home improvement loan, a re-mortgage or a consolidation of existing qualifying loans [i.e. loans used for the purchase, repair or improvement of your home], secured on the deeds of the home. Since 1 January 2002 the relief is paid at source by your mortgage provider. This system of giving relief at source rather than the relief having to be claimed back at the end of the year is called tax relief at source [TRS]. The mortgage interest relief is given at source, by your mortgage provider, either in the form of a reduced monthly mortgage payment or a credit to your funding account.
You do not have to be earning a taxable income to qualify for mortgage interest relief.
Section 2: What is a Qualifying Mortgage?
A qualifying mortgage for the purpose of interest relief is a secured loan, used to purchase, repair, develop or improve your sole or main residence, situated in the State. You can claim tax relief in respect of the interest paid on this loan or mortgage.
You can also claim tax relief in respect of the interest on a mortgage paid by you for your separated/divorced spouse or former partner in a dissolved civil partnership, and a dependent relative (i.e. widowed parent or a parent who is a surviving civil partner or elderly relative) for whom you are claiming a dependent relative tax credit.
Tax relief is only available up to the maximum allowance.
Mortgage Interest Relief Rates/Ceilings
Switching lender or mortgage type to achieve a better interest rate is not the same as taking out a new loan. However, a new mortgage where you move home and take out a mortgage with a new or existing lender is eligible for relief.
Mortgages taken out from 1st January 2004 to 31st December 2012, subject to qualifying mortgage criteria, are eligible for mortgage interest relief until 31st December 2017 (see rates/ceilings chart).
Mortgages taken out after 31st December 2012 will not qualify for mortgage interest relief.
Mortgages taken out prior to 1st January 2004 are no longer eligible for mortgage interest relief. However, top up loans/equity release loans taken out since 1st January 2004 on these pre-2004 loans may be eligible for mortgage interest relief, provided they adhere to eligibility criteria as listed above.
Section 3. What changes have arisen from the Budget Announcement on 6th December 2011 [Budget 2012]
From 1st January 2012 the rate of mortgage interest relief for first time buyers who took out their first mortgage between the years 2004 to 2008 and are residing in the property increases to 30% until 2017. If you took out a loan outside of these dates the existing rules remain unchanged. (see rates/ceilings chart)
Section 4. If I took out my first mortgage between the years 2004 to 2008 what do I need to do?
There is no need for you to do anything. Revenue and the lending institutions will make the necessary changes. For administrative reasons this will take a period of time to complete but you will not lose out and you will get the full mortgage relief due to you in 2012.
Section 5. What is my position if a took out a loan after 2008?
The situation is unchanged and the existing rules apply. (see rates/ceilings chart) You are not entitled to any increase in mortgage interest relief arising from the Budget 2012 changes in mortgage interest relief.
Section 6. What is a year of assessment for mortgage interest relief?
An individual's income tax liability is calculated on what is known as a 'year of assessment' basis. This is also known as a tax year. It is the same as the calendar year, i.e. runs from 1st January to 31st December.
Mortgage interest relief is calculated by reference to a year of assessment. Entitlement to relief is therefore based on the calendar year only [1st January – 31st December], not for any 12 month period [e.g. 1st April to 31st March].
By way of a practical example of how this works, where John takes out a loan on his main residence in June 2008, the first year of assessment is January to December 2008. John has an entitlement to mortgage interest relief for the period June to December 2008 [on the basis of the interest paid by him on the loan from June to December]. From January 2009 John will be in his second year of entitlement to mortgage interest relief.
Section 7: How do I claim mortgage interest relief?
Mortgage interest relief must be claimed online. A married couple or couple in a civil partnership may submit their details online on the same application. In all other cases of joint borrowings, each claimant should submit their details online separately. If you cannot use the online facility, please contact the TRS Helpline on 1890 46 36 26 or email trsadmin@revenue.ie for assistance.
When should I apply for mortgage interest relief?
You should apply online as soon as you have commenced repayments on your loan. In addition, if there is a material change to your loan [for example if you take out a top up mortgage on your home] you need to advise Revenue using the on-line system
How long does it take after I apply before I get my mortgage interest relief?
It can take a period of up to 8 weeks for mortgage interest relief to be applied to your mortgage by your lender, as your mortgage details have to be processed by Revenue and advised to your lender in advance. Please note that it may take longer to apply mortgage interest relief if you have switched or consolidated loans. (Where you apply during the year in which you take out the loan, your lender will pay any arrears due to you in that year.) Apply Online
Do I need to apply for mortgage interest relief every year?
No. If your mortgage remains the same, your lender will continue to apply the relief automatically each year. However, if you take out a Top Up mortgage on your existing property you will need to inform Revenue. Also, if you move home and take out a new mortgage on your new property, you will need to inform Revenue.
Where there is a change to your mortgage and you are uncertain as to your continued eligibility there is an onus on you to notify Revenue of the change. Failure to do so will result in you having to repay any relief to which you were not entitled and where failure to notify has been done knowingly it will constitute a prosecutable offence.
How do I claim for previous years?
Claims for previous years (up to the last 4 years) must be applied for online.
Section 8: What type of loan does NOT qualify for mortgage interest relief?
Mortgage interest on a loan taken out for investment, rental, secondary or any properties other than your main residence does not qualify for interest relief. Mortgage relief for rental properties as part of your business is available through the tax system and you should contact your local Tax Office.
Mortgages taken out prior to 1st January 2004 are no longer eligible for mortgage interest relief.
I own two properties which I split my time between for work commitments. Can I claim mortgage interest relief on both?
No. In this case, you should nominate which property is your principal private residence and claim relief on that mortgage.
Can I claim mortgage interest relief on an Investment property?
No. Mortgage interest relief only applies to a loan in respect of your main residence. If the property you have is an investment property and you are receiving mortgage interest relief you should advise Revenue immediately using a 
TRS 4 form (PDF, 47KB) or by contacting the Revenue TRS Helpline 1890 46 36 26.
Can I claim mortgage interest relief if I move out of my main residence and rent it out?
No. As the house would no longer be your principal private residence, you would not be entitled to mortgage relief.
What are the implications for my mortgage relief if part of my mortgage is used to finance non-house expenditure i.e. holiday, car, education etc?
The full interest incurred by you is not eligible for relief in this instance. You must calculate the proportion of the mortgage that is applicable to your home, and insert this percentage on the space provided on the on-line system.
For example, assume you borrowed €200,000, and €30,000 is being used for non-house purposes, the percentage of your loan that qualifies for TRS can be calculated as follows:
Total amount borrowed = €200,000
Amount used on main residence = €170,000
Percentage of loan eligible for TRS = €170,000 divided by €200,000 x 100 = 85%
You must insert 85% in the 'percentage used on mortgaged property' space on the online application. TRS is only payable on the qualifying 85%.
Living or Working in the United Kingdom
Am I eligible for mortgage interest relief if I live and/or work in the U.K.?
If you are living in the State and paying a mortgage to a qualifying lender in the State but working in Northern Ireland, you can claim mortgage interest relief in this country, provided you have a PPS number. If you do not have a PPS number, you must apply for one from the Department of Social Protection.
Other loans, such as loans in UK currency, are not eligible for relief through the
Tax Relief at Source Scheme but may be eligible for relief from your Local Inspectors
Office.
You should contact your Local Tax Office for further information.
December 2011