Budget 2017: Landlords ‘disappointed’ despite longed-for tax break

Landlords will get some relief on their 2017 tax bills thanks to the budget, in which Minister for Finance Michael Noonan signalled an increase in tax relief on mortgage interest in 2017 and a full restoration by 2021.

Landlords will be able to deduct 80 per cent of the interest paid on borrowings on a rental property next year, up from 75 per cent previously, with “full interest deductibility” expected by 2021.

Mr Noonan said it is “an appropriate time” to revisit this measure in the context of the housing crisis.

“In light of the incentive I introduced last year to support landlords who let their property to social housing tenants for a minimum period of three years, I am going to restore full interest deductibility for other landlords on a phased basis and my first step is to increase the level from 75 per cent to 80 per cent in 2017. I will increase it by instalments of 5 per cent until the full 100 per cent deductibility is restored,” he said.

Mortgage-free landlords

Pat Davitt, chief executive of the Institute of Professional Auctioneers & Valuers (IPAV), said it was “disappointing overall”.

“There was very little for landlords really,” he said, but added that the measure to increase mortgage interest relief, though “small”, was welcome.

“It is a start towards bringing about greater fairness between private and commercial landlords over the next number of years. It will help address the haemorrhaging of private landlords from the sector,” he said.

Indeed tax experts say that the savings arising from Tuesday’s measure, which will cost the Government €8 million on a full-year basis, will be just €77 a year.

According to Alison McGinley, MD of TaxAssist Accountants, a landlord paying €3,900 in mortgage interest a year will save just €78 on their 2017 tax bills.

“On top of this, a vast swath of ‘accidental landlords’ have tracker mortgages. They are paying such little interest that this relief will provide nothing for them,” she said.

In addition, about 50 per cent of properties in the rental sector are understood to be mortgage free, so the measure won’t benefit them.

Rent-a-room

While Mr Noonan did not offer relief to those renting out properties on a short-term basis, such as via Airbnb, he did announce a significant increase to the rent-a-room scheme. Those letting out a room in their home on a long-term basis, such as to a student, can now earn up to €14,000 a year tax free, up by 17 per cent from €12,000 previously.

This means that someone can now earn up to €1,166 a month tax free, although the costing of the scheme – at just €1 million a year – indicates that the increase won’t apply to many people, who probably earn less than the new threshold each year.