Tax relief on renovating or extending your own home?

Discussion in 'Tax' started by landlord, Oct 15, 2007.

  1. landlord

    landlord Frequent Poster

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    A collegue at work told me today that if you top up your mortgage for the purpose of extending renovating or refurbishing your own home you can claim tax relief on the interest you pay on the top up mortgage? Is this true??? I didnt think so my self.
     
  2. z109

    z109 Guest

    I think you're right, but maybe he is talking about mortgage interest relief? (You are talking at cross purposes). You cannot claim through the tax system for relief from home improvement expense, AFAIK.

    Situation where you can claim increased mortgage relief would be where your current mortgage is below the top of the mortgage interest relief limit and you take out a top-up mortgage. You can then claim the mortgage interest relief on the top-up. It would probably be up to you to set this up if you took out the top-up with a different lender.


    From the revenue Q&A
    A qualifying loan for the purpose of mortgage TRS is a secured loan, used to purchase, repair, develop or improve your sole or main residence, situated in the State. You can claim mortgage tax relief in respect of the interest charged/paid on your main residence. You can also claim mortgage tax relief in respect of a mortgage paid by you for your separated/divorced spouse, and a dependent relative (i.e. widowed parent, elderly relative) for whom you are claiming a dependent relative tax credit. However, your mortgage TRS entitlement cannot exceed the maximum TRS allowance quoted in Table 2, below.
     
  3. ClubMan

    ClubMan Frequent Poster

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    Yes - it's correct. Subject to the normal relief limits interest on any loans used to purchase or renovate one's PPR qualify for standard rated owner occupier mortgage interest tax relief at source.
     
  4. z109

    z109 Guest

    But note the difference between "mortgage interest relief" and "tax relief".
     
  5. ClubMan

    ClubMan Frequent Poster

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    Mortgage interest relief is a form of tax relief. It's not income tax relief though obviously.
     
  6. landlord

    landlord Frequent Poster

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    Thanks for the help. Myself and my girlfriend are joint owners of a house and are already paying a mortgage is 452,000 Euro between us would I not already be receiving the maximun T.R.S ? Also I would be topping up my investment property mortgages to fund this extension, not my home mortgage. Not sure if that makes a difference?
     
  7. z109

    z109 Guest

    Last edited by a moderator: Oct 17, 2007
    As Clubman is at pains to point out (and will no doubt correct me!), you should not claim tax relief on rental income on an investment property mortgage if that mortgage is used for any purpose other than renovating the investment property or purchasing another investment property.

    Yes, you are maxed out on TRS (mortgage interest tax relief) relief on €16,000 of interest between you (if you are FTB) or €6,000 between you otherwise. Your interest on your mortgage must be more than €16,000?
     
    Last edited by a moderator: Oct 17, 2007
  8. ClubMan

    ClubMan Frequent Poster

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    Not correcting you but just to clarify ... you can claim owner occupier mortgage interest tax relief on interest on any loan(s) used to purchase or renovate your PPR. You can offset interest on any loan(s) used to purchase/ or renovate an investment property against rental income from that property. What matters is not what property/asset (if any) such loans are secured on but what the money is used for. You cannot claim owner occupier mortgage interest tax relief on interest on a loan secured against your PPR but used for purposes other than purchase/renovation of that property (e.g. holiday, car, investment property purchase). If that money was used to purchase an investment property then you can offset the relevant interest against rental income. And so on...

    To extimate your annual interest bill enter your mortgage details (amount, term, rate, start date) into Karl Jeacle's mortgage calculator and click the Annual Table button to get an estimate of your total annual capital and interest repayments.
     
  9. landlord

    landlord Frequent Poster

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    The intention was not to claim extra tax releif on the rental income from this top up. Although i will be topping up my investment properties, the purpose of this loan is to fund an extension, so the only extra tax releif I would be claiming is an increase of TRS.....but if I am maxed out anyway it doesnt matter.
    Regarding my claim for interest on the investment properties, this top up will have no effect. Hopefully that makes some sense.