473C Mortgage Interest Tax Credit

Summary

Finance Bill 2023 introduced a tax relief for taxpayers who have made payments in respect of a qualifying loan for a principal private residence. Finance Act 2024 extended the relief to 2024.

The relief is available to homeowners with an outstanding mortgage balance between €80,000 and €500,000 as of 31 December 2022.

The relief is available in respect of the 2023 and 2024 years of assessment:

• for the 2023 year of assessment the relief is available on the increase in interest paid in 2023 over interest paid in 2022,
• for the 2024 year of assessment the relief is available on the increase in interest paid in 2024 over interest paid in 2022.

The amount qualifying for relief at the standard rate of tax is capped at €6,250 per residence per year. This is equivalent to a maximum tax relief of €1,250. Where conditions are met, the relief is granted, by means of a tax credit, on foot of a claim being made to Revenue by the claimant.

Details

Definitions

(1) “appropriate percentage”, in relation to a year of assessment, means a percentage equal to the standard rate of tax for that year;

“claimant” has the meaning given to it by subsection (2);

“credit information provider” has the meaning given to it by section 2 of the Credit Reporting Act 2013;

“dependent relative”, in relation to an individual, means any of the persons mentioned in paragraph (a) or (b) of subsection (2), or in paragraph (a) or (b) of subsection (2A), of section 466 in respect of whom the individual is entitled to a tax credit under that section;

“loan” means any loan or advance or any other arrangement whatever by virtue of which interest is paid or payable;

“local property tax number” means the unique identification number assigned to a residential property by the Revenue Commissioners under Section 27 of the Finance (Local Property Tax) Act 2012;

“mortgage interest tax credit” has the meaning given to it by subsection (2);

“personal representative” has the same meaning as in section 799;

“PPS Number”, in relation to an individual, means the individual’s Personal Public Service Number within the meaning of section 262 of the Social Welfare Consolidation Act 2005;

“qualifying interest” in relation to an individual, means the total amount of interest falling due in a year of assessment, and paid in that year of assessment, where such interest has been paid in respect of a qualifying loan;

“qualifying lender” means a credit information provider;

“qualifying loan”, in relation to an individual and a qualifying property, means a loan or loans from a qualifying lender which, without being used for any other purpose, is or are used by the individual solely for the purpose of defraying money employed in the purchase, repair, development or improvement of the qualifying property or in paying off another loan or loans used for such purpose, and is or are secured by the mortgage of freehold or leasehold estate or interest in that qualifying property, and the amount of the aggregate of the balance remaining unpaid on the loan or loans in respect of that qualifying property on 31 December 2022 is—

1. not less than €80,000, and
2. not more than €500,000;

“qualifying period” means

1. for the purpose of subsection (4) the period commencing on 1 January 2023 and ending on 31 December 2023, and
2. for the purpose of subsection (4A) the period commencing on 1 January 2024 and ending on 31 December 2024;

“qualifying property”, in relation to an individual, means a residential property which is used as the sole or main residence of—

1. the individual,
2. a former or separated spouse of the individual, or a former civil partner or a civil partner from whom the individual is living separately in circumstances where reconciliation is unlikely, or
3. a person who, in relation to the individual, is a dependent relative, and which is, where the residential property is provided by the individual, provided rent-free and without any other consideration;

“relievable interest” has the meaning given to it-

by subsection (4) for the 2023 year of assessment, and

by subsection (4A), for the 2024 year of assessment;

“residential property” means—

1. a building or part of a building located in the State which is used or suitable for use as a dwelling, and
2. adjoining land which the occupier of the building or part of the building, referred to in paragraph (a), has for his or her own occupation and enjoyment with that building or part of that building as its gardens or grounds of an ornamental nature;

“separated” means separated under an order of a court of competent jurisdiction or by deed of separation or in such circumstances that the separation is likely to be permanent;

“specified amount”, in relation to a year of assessment, means the lesser of—

1. an amount equal to the relievable interest, and
2. the upper limit or where two or more individuals are entitled to the relief the amount determined in accordance with subparagraph (9)(b)

“upper limit” means €6,250 or, where subsection (5) applies, the amount determined in accordance with paragraph (a)(i), (a)(ii) or (b), as the case may be.

Entitlement to the credit

(2) The mortgage interest tax credit will be available in respect of the 2023 and 2024 year of assessment, where applicable, where an individual (the claimant):

1. proves that during the qualifying period he or she made a qualifying payment in respect of that qualifying property, and
2. makes a formal claim for the credit.

In such circumstances, the tax credit will be available in respect of the lesser of:

• an amount equal to the appropriate percentage of the specified amount, specified amount being defined above as the lesser of the relievable interest or the upper limit,
  or
• an amount that reduces the claimant’s liability to nil.

Payment of interest by spouse or civil partner

(3) Where joint assessment applies, a payment of interest made by a spouse or civil partner, is considered a payment by the claimant.

Calculation of relievable interest

(4) Relievable interest is the increase in relievable interest in 2023 over 2022.

(4)(a) The below formula provides the method for arriving at relievable interest, which is the increase in interest in 2023 over that in 2022.

A-B

Where

A is the amount of qualifying interest for the year of assessment 2023, and

B is the amount of qualifying interest for the year of assessment 2022.

(4)(b) Where the periods in a year for which interest is paid is not the same the following formulae adjust the interest paid, in either year, to correspond with a period of equivalence.

Where 2023 has a greater number of days interest paid the following formula is used

A × D/E

Where 2022 has a greater number of days interest paid the following formula is used

B × D/E

Where

D is the number of days in the year of assessment with the lesser number of days, and

E is the number of days in the year of assessment with the greatest number of days.

Calculation of relievable interest for 2024 claims

(4)(A) Relievable interest is the increase in relievable interest in 2024 over 2022.

(4A)(a) The below formula provides the method for arriving at relievable interest, which is the increase in interest in 2024 over that in 2022.

A-B

Where

A is the amount of qualifying interest for the year of assessment 2024, and

B is the amount of qualifying interest for the year of assessment 2022.

(4A)(b) Where the periods in a year for which interest is paid is not the same the following formulae adjust the interest paid, in either year, to correspond with a period of equivalence.

Where 2024 has a greater number of days interest paid the following formula is used

A × D/E

Where 2022 has a greater number of days interest paid the following formula is used

B × D/E

Where

D is the number of days in the year of assessment with the lesser number of days, and

E is the number of days in the year of assessment with the greatest number of days.

Proration of the upper limit for 2023

(5) Where there is less than a full year’s interest paid in any year of assessment the upper limit must be prorated to reflect this.

(5)(a) Where either year of assessment has less than 365 days and the other year has the full 365 days the following formula is applied to apportion the upper limit

F × G/H

(5)(b) Where both years of assessment have less than 365 days the upper limit is apportioned using the following formula

F × I/J

Where

F is the upper limit

G is the number of days in the year with the lesser number of days

H is the number of days in the year with the greater number of days

I is the number of days in the year with the lesser number of days

J is 365 days

Proration of the upper limit for 2024

(5A) *2024, as a leap year, has 366 days therefore the formulae in this section are to be read as though references to 365 days for 2024 is 366 days.

Where there is less than a full year’s interest paid in any year of assessment the upper limit must be prorated to reflect this.

(5A)(a) Where either year of assessment has less than 365* days and the other year has the full 365 days the following formula is applied to apportion the upper limit

F × G/H

(5A)(b) Where both years of assessment have less than 365* days the upper limit is apportioned using the following formula

F × I/J

Where

F is the €6,250

G is the number of days in the year with the lesser number of days

H is the number of days in the year with the greater number of days

I is the number of days in the year with the lesser number of days

J is 365 days*

Interest payment refers to more than one year

(6) Where an interest payment is made, and the payment refers to more than one year, the amount of interest paid must be apportioned to the relevant years.

Interest paid by personal representative

(7)(a) A payment of interest by a personal representative, where an individual dies during the qualifying period and the payment of interest is in respect of the principal private residence of the deceased individual’s widow, widower or surviving civil partner, or a dependent relative of the deceased, is deemed to be a qualifying payment and relief applies under subsection (2).

(7)(b) The definition of qualifying property extends to a residential property used to facilitate the individual’s or their spouse/civil partner’s attendance at work.

Exclusions

(8) There are a number of exclusions from the definition of a qualifying property being:

(8)(a) any residential property not compliant with Local Property Tax (LPT) obligations;

(8)(b) any residential property not compliant with Planning Permissions;

(8)(c) any residential property acquired from an individual who is a connected party where it appears that the purchase price of the residential property substantially exceeds the value of what is acquired.

More than one claimant

(9) Where there is more than one claimant the upper limit must be prorated. The apportionment is calculated using the following formula

K × L/M

where

K is the upper limit

L is the relievable interest for an individual

M is the relievable interest for all individuals on the same qualifying property

Oireachtas members exclusion

(10) Members of the Oireachtas are excluded from relief under this section where an allowance under s836 TCA has been paid or is payable or relief under s836 TCA is allowed.

Information required to make a claim

(11) The following information is required to make a claim for the mortgage interest tax credit. Revenue will make an electronic process available to facilitate claims for the mortgage interest relief credit and all claims made should set out the following information:

• (11)(a) The claimants name address (including the Eircode) and PPS number
• (11)(b) The address (including the Eircode) and LPT number of the qualifying property

(11)(c)&(d) If the property is used by a claimant’s former or separated spouse or civil partner or a dependent relative;

• the name, address (including the Eircode) and PPS Number of the claimant’ dependant relative, spouse or civil partner,
• the address (including the Eircode) and LPT number of the qualifying property.

(11)(e) The claimant must provide full particulars of the qualifying loan or loans under which qualifying interest was paid, including but not limited to—

• the qualifying interest paid by the claimant for the years of assessment 2022 and 2023 or 2024 as the case may be,
• where the property was acquired from a connected party, the total qualifying interest paid by all of the individuals concerned for the years of assessment 2022 and 2023 or 2024 as the case may be, and
• the amount of the aggregate of the balance remaining unpaid on the loan or loans as provided for in the definition of ‘qualifying loan’ at 31 December 2022.
• (11)(f) Any other information that may reasonably be required by the Revenue Commissioners to determine whether the requirements of this section are met.

Revenue powers

(12) Revenue has the power to require a qualifying lender to provide Revenue details referred to in subsection (11)(f).

(13) Revenue has grounds to refuse a claim or to withdraw the credit if the claimant fails to furnish any of the information or documentation requested under subsection (11).

Relevant Date: Finance Act 2024