What to do about Tax when you buy a house

1. Do I need to tell the tax office if I buy a house?

Yes - you should inform the tax office as soon as possible so that all correspondence can be sent to your new address.

2. Can I claim tax relief on my mortgage?

Yes - if the house is situated in the State, Northern Ireland or Great Britain

3. What is a sole or main residence?

A sole or main residence is the residence which is your home for the greater part of the time. It does not have to be owned by you e.g. your parents? residence may also be your sole or main residence, if you normally live there.

4. To help with the mortgage repayments, I intend letting part of my house. What tax relief can I claim against my personal income tax and against the rental income?

In this situation, part of the mortgage interest may be claimed as a normal interest credit against your personal income tax. However, the balance of the interest may not be claimed as a rental deduction. The mortgage interest applicable to the let part of the house will be determined on a just and reasonable basis. For example, the apportionment of the interest may be by reference to the number of rooms let.

5. Does residence only mean a house?

No. It also includes:

• A flat
• Any garden or grounds of an ornamental nature which are used along with the house or flat
• A Mobile Home/Caravan - provided it:
  • Is on a permanent site
  • Is of a reasonable size to fulfill the requirements of use as a permanent residence
  • Has electricity and other services supplied to it
  • Is immobilised (i.e. wheels removed and mounted on blocks).

6. Can I claim tax relief on a loan for home improvements?

Yes. You can claim tax relief on a loan used by you to purchase, repair, develop or improve your sole or main residence or to pay off another loan (or loans) used for that purpose.

7. What can the loan be used for?

The loan can be used for most work done on your sole or main residence except for money spent on furniture or removable fittings (e.g. light fittings, curtains, carpets etc.). Examples of what the loan may be used for are:

• Extensions, purchase/construction of garage, garden shed, greenhouse etc.
• Construction of driveway, path etc.
• Conversions, painting and decorating
• Installing central heating
• Rewiring or replumbing (including bathroom suites)
• Replacing or installing windows
• Purchase and/or installation of burglar/fire alarms
• Purchase and installation of bedroom and kitchen units which are affixed to and become part of the building
• Treatment for damp, dry rot, woodworm etc.
• Landscaping gardens (including garden walls)
• Contributions to group water and sewerage schemes.

8. How much tax relief will I get?

Please use our tax relief calculator to estimate your monthly/annual relief.

Special provisions apply for "First Time Buyers". The period for which relief is available is 7 years (this does not apply to mortgages taken out before 6 April 1998).

9. How can I claim the relief?

From 1 January 2002, tax relief for home mortgage interest is no longer given through the tax system but is instead granted at source. This means that your mortgage lender gives you the benefit of the tax relief element on the mortgage interest on behalf of the Revenue Commissioners.

Your mortgage repayment is reduced by the amount of the tax relief. Your lender in turn claims this amount from Revenue. Any future adjustments in the tax relief (for example, arising from changes in interest rates) will be made automatically by the lender on behalf of Revenue. It is not be necessary to claim mortgage interest relief in the annual tax return, and it no longer appears on your Notice of Tax Credits. Borrowers who are taking out new mortgages must complete a TRS1 form. Your lender will supply you with a TRS1 form. Forms can also be obtained from the TRS Section, Collector-Generals, Sarsfield House, Francis Street, Limerick.

10. If I sell my house will I have to pay Capital Gains Tax?

No. If the house (including grounds of up to one acre) has been occupied as your sole or main residence throughout your period of ownership you will be exempt from capital gains tax on the sale.

11. What happens if I had let part of the house or used part of the house for business purposes?

Full exemption may not be due if only part of the house has been used as your residence. In this case an apportionment will be made to arrive at the exempt portion of the total gain and you will have to pay capital gains tax on the balance.

12. What happens if my property has "development value"?

Where your property has development value i.e. if it is sold for a price higher than its normal current use value then the relief from capital gains tax as outlined above is confined to what it would be if the property did not have development value.