The Government’s new mortgage interest scheme, announced last October and set to operate for one year only, is due to launch at the end of this month.
The scheme promises savings of as much as €1,250 for eligible mortgage holders, who saw an increase in the interest they paid in 2023, when compared with 2022, as a result of rising European Central Bank interest rates. It is expected to benefit about 160,000 homeowners – although not all will get the full amount.
But how will the scheme work and how can you claim your credit? Just before Christmas, Revenue published its guidelines so, if you think you may be due some money back on the interest you have paid, here is what you need to know.
Who can claim?
There are a number of restrictions associated with the scheme. First, you will need to have a “qualifying loan” – your outstanding mortgage must have been between €80,000-€500,000 at the end of 2022.
In addition, you will need to have your local property tax payments up to date to qualify, while the property must also be compliant with planning regulations.
Separated couples should be able to qualify, with whoever typically pays the mortgage on a property eligible to claim the relief even if their former spouse resides in it.
TDs, who already claim expenses related to their property, will not be able to claim the relief.
To qualify, you will also need to have experienced an increase in the interest rate paid on your loan between 2022-2023.
This means the scheme may be of most interest to those on tracker mortgages, who will have seen significant increases from rates of as low as 0.5 per cent to in excess of 4.5 per cent over that period. Those on long-term fixed-rates on the other hand, will be unlikely to benefit, as they may have seen no change at all in the qualifying period, unless the fixed-rate came to an end last year.
How much will I get back?
This depends on how much interest you paid in 2023 over what you paid in 2022. A cap of €6,250 applies. That means, based on the standard rate of tax of 20 per cent, you can benefit to a maximum of €1,250 (20 per cent of €6,250).
So, to get the full amount, you will need to have paid an additional €6,250 in interest over the course of 2023 compared with 2022.
As a guide, someone with a €300,000 mortgage outstanding on December 31st, 2022 over 30 years would have paid about €6,800 in interest in 2022 based on an interest rate of 2.5 per cent.
If this increased to 4 per cent in 2023, they would have paid about €11,000. This means a differential of about €4,200, and a tax refund of €840.
If a couple is claiming the relief, the credit will be split between them. This can be divided 50/50 between the couple, where both paid similar amounts. If the contribution to mortgage payments differ between the couple, this will also be taken into account, with the person who paid less interest getting a lower rebate.
But what about if the mortgage was paid off in 2023? In that case, it might appear that a higher interest bill was recorded in 2022 – even if the actual rate increased during 2023. In such cases, Revenue says it will “perform all required calculations once provided with the relevant information and will calculate the relief due”.
How can I work out what I paid in interest?
Assuming you meet the other criteria, to understand if you are eligible for a rebate you first need to work out how much interest you paid on your loan in 2022 and compare this with what you paid in 2023.
To do this, you need to get in touch with your lender and ask for an interest statement for both years. These should be readily available and you may already have received such documents – certificates of interest – in the post.
A spokesman for Bank of Ireland says its mortgage customers do not need to do anything; they will be sent their mortgage interest statement for both 2022 and 2023 during January, and also their annual mortgage statement for 2023, which will show their opening and closing balances. If you redeemed your mortgage during 2023, you can get your documentation via bankofireland.com/mymortgage.
At AIB, a spokesman says that customers should already have received their documents for 2022, and will receive their statements for 2023 “over the coming weeks”. At EBS and Haven, mortgage information will be issued in February and March, respectively.
How can I claim?
Once you have worked out that you will be due a rebate, you can go ahead and make a claim.
To do this, you will need to file an income tax return. This has become increasingly standard for PAYE taxpayers in recent years to claim a variety of credits or to seek a balancing statement.
It can be done via the Revenue’s MyAccount service and a lot of fields are pre-filled which makes the process easier. It still marks a leap in the amount of responsibility Revenue is looking to place on taxpayers in terms of information that PAYE taxpayers must provide each year.
At the moment, mortgage interest relief claims cannot be processed, but Revenue expects the system will go live around the end of January for PAYE workers, with the facility for self-assessed taxpayers available in mid-February. This means now is a good time to prepare the necessary documentation so that when a claim can be filed, it can be done so expeditiously.
You are going to need the following documents to file your claim:
- Certificate of mortgage interest for 2022 and 2023
- Confirmation of mortgage balance as of the end of December 2022
For those filing a Form 12 (PAYE workers), these documents can be uploaded to MyAccount via the “Upload Supporting Documents” tab.
What if I am self-employed?
If you are self-employed and file a Form 11 each October/November, you will also be able to claim the credit at that time. However, there may be a bit of a lag.
This is because you typically won’t file your Form 11 for 2023 until autumn 2024, although you can take it into account in your tax calculations, and plan for a reduced advance payment come next October.
Again, you will need the three documents outlined above and you will find a section on claiming the mortgage interest tax credit in the “Personal Tax Credits” section.
When will I get my money back?
As a Revenue spokesman notes, the mortgage interest tax credit is not a real-time tax credit. This means you will not receive the benefit of this relief via increased tax credits; rather, if entitlement to a refund arises on the filing of a tax return, it will be paid directly into your bank account, or sent out to you by cheque if you have not given your bank details in your return.
So, it is more akin to the “cheque in the post” type reliefs of old as opposed to health expenses or the rent credit etc, whereby your tax profile is simply adjusted.
If you have already filed your 2023 income tax return and you think you will be eligible for a claim, you will need to go back and file an amended 2023 return to claim the mortgage interest tax credit.
According to Revenue, you should receive your refund within five days of filing the relevant return.
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