I was doing up some TRS calculations for my mortgage this morning and came across something I didn't realise. I rang the TRS helpline to clarify and they said a lot of people have the same misconception.
The fact is this: you are only a first time buyer for 7 years for TRS.
So in my case, I bought in 2007 as a married couple so I only get 30% relief on €20,000 from 2007-2013 and in 2014-2017 I get 30% on €6,000. (10k versus 6k for a single person obviously).
I had my calculations done on the fact that it was 20k all the way up to 2017
The charts are here:
http://www.revenue.ie/en/tax/it/reliefs/tax-relief-source-mortgage-rates.html
My understanding - please feel free to point out errors.
In Budget 2012 a special rate of 30% for the tax years 2012 to 2017 was introduced for first-time buyers who took out mortgages in the boom years of 2004 to 2008.
This sounds great and first time buyers (FTB) should be happy but remember you are only a FTB for the first 7 years after you buy so the relief may not be as valuable as you think.
Let me explain.
Single First time Buyer:
You bought in 2006. You will be classed as a first time buyer from 2006-2012 only. Why is this important?
For the first 7 years as a first time buyer you are entitled to relief on the first €10,000 interest payable on your mortgage. After 7 years you will be classed as a non first time buyer and will get relief on the first €3,000 only.
The new rule entitles you to 30% relief from 2012 to 2017.
Remember you are only classed as a first time buyer until 2013.
Therefore
2012 : 30% of first €10,000 (€3000)
2013-2017 : Now a non first time buyer so you are entitled to 30% of €3,000 (€900)
An example should make it easier to understand:
Mortgage of €300,000. Interest rate of 4%. Interest payable = €12,000
2012 : Tax relief = 30% x €10,0000 (max) = €3000
2013 - 2017: Tax relief = 30% x €3,000 (max) = €900
Married First time Buyer:
You bought in 2008. You will be classed as a first time buyer from 2008-2014 only. Why is this important?
For the first 7 years as a first time buyer you are entitled to relief on the first €20,000 interest payable on your mortgage. After 7 years you will be classed as a non first time buyer and will get relief on the first €6,000 only.
The new rule entitles you to 30% relief from 2012 to 2017.
Remember you are only classed as a first time buyer until 2015.
Therefore
2012 : 30% of first €20,000 (€6000)
2013 : 30% of first €20,000 (€6000)
2014 : 30% of first €20,000 (€6000)
2015-2017 : Now a non first time buyer so you are entitled to 30% of €6,000 (€1800)
Mortgage of €300,000. Interest rate of 4%. Interest payable = €12,000
2012, 2013, 2014 : Tax relief = 30% x €12,000 (max) = €3600
2015 - 2017: Tax relief = 30% x €6,000 (max) = € 1800
Conclusion:
The misconception is that FTBs will get 30% relief as a first time buyer for the years 2012-2017 if they bought in 2004-2008.
The truth is they will get 30% relief as a first time buyer for the first 7 years after they bought, after that they will get 30% relief at non first time buyer rates.
If you bought in 2004,2005 you are no longer a first time buyer so you will only get 30% relief at the non first time buyer rate.
Again, not to be sniffed at but not as valuable as people think.
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