A one-off tax relief for homeowners announced in last autumn’s budget is now available to claim.
The Mortgage Interest Tax Credit has been introduced as a way to soften the blow mortgage holders took when the European Central Bank raised interest rates sharply in 2022. Although it started from a historically low base, following 10 successive hikes the main lending rate eventually hit 4.5%.
That meant that the average rate for a new mortgage in Ireland jumped from around 2.5% in autumn 2022 to around 4% by the end of last year. If you took out a €250,000 mortgage over a 25-year term, that would equate to a €200 a month increase in repayments.
The mortgage credit was one of a package of tax giveaways announced in the budget to help Irish taxpayers navigate the cost of living crisis. The credit can be claimed to reduce your Income Tax liability in 2024. To qualify, you have to have had an outstanding mortgage balance of between €80,000 and €500,000 as of 31st December 2022.
The credit is available on mortgage payments made in 2023 in lieu of any increase in interest payments. So if interest payments on your mortgage did not change between 2022 and 2023, for example because you are on a fixed-rate mortgage that renews after 31st December 2023, you do not qualify.
But if you were on a tracker or variable rate mortgage throughout 2022 and 2023, or you renewed a fixed rate mortgage in 2023, you may be eligible.
Qualifying residences and caps
Other qualifying criteria relate to the property. Mortgage Interest Credit is only available if:
- the property you pay the mortgage on was your principal private residence in 2023;
- the property in question was the principal residence of a dependent relative;
- or it was used by a spouse as a residence for the purpose of attending employment.
Any property that does not comply with Local Property Tax (LPT) obligations, or does not comply with planning permission, is disqualified.
The credit is calculated at 20% of the difference between the interest you paid on your mortgage in 2022 and 2023. So if you paid €1,000 more in interest in 2023, you will get €200 back. The maximum difference in interest payments you can claim for is capped at €6,250 per property, meaning a maximum credit of €1,250. You cannot claim more than your Income Tax liability.
These calculations are based on qualifying interest payments covering the whole of 2022 and 2023. If you didn’t make mortgage payments for all of one of these years – for example, because you bought a home part way through 2022 – then the credit you can claim will be adjusted downwards according to the length of time to did make interest payments for.
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