Understanding Mortgage Interest Relief in Ireland: A Guide for Self-Employed Individuals

Mortgage interest relief is a critical financial support introduced as part of Budget 2024 for homeowners in Ireland, offering them a way to alleviate some of the financial burdens associated with mortgage payments. 

But what is it, and how does it work? Are self-employed individuals eligible for it? Don’t worry; our expert team at Tax Returns Plus are here to break it all down for you in this detailed guide, particularly in the context of self-employed individuals.

What is the Mortgage Interest Relief?

Mortgage interest relief, or mortgage interest tax credit, allows homeowners to deduct a portion of the interest paid on their mortgage between 2022 and 2023 from their taxable income. This tax deduction aims to make homeownership more manageable by reducing the overall tax burden on individuals. The concept originated to help first-time buyers and those in specific financial situations to afford home ownership more readily.

The previous mortgage interest relief scheme ended on January 1, 2021, and didn’t extend to mortgages initiated after December 31, 2012. A newly introduced temporary mortgage interest tax credit was unveiled in Budget 2024 for select homeowners. This credit solely pertains to tax assessments for the year 2023.

How Does Mortgage Interest Tax Relief Work?

The Mortgage Interest Tax credit is granted on the increase in mortgage interest you paid in 2023 compared to 2022. The eligible difference is given a 20% tax credit, which may result in a rebate. This relief takes the form of a tax deduction from the taxpayer’s income tax liability and is limited to a maximum of €1,250.

How Much is Mortgage Interest Tax Relief?

A one-time tax relief of 20% is available on any increase in mortgage interest paid from the end of 2022 to 2023, with the relief capped at €1,250. This temporary Mortgage Interest Tax Credit only applies to homeowners who had a mortgage before 31 December 2022.  The outstanding mortgage must be between €80,000 and €500,000 as of 31st of December 2022.

Benefits of Mortgage Interest Relief for Self-Employed Individuals

Enhancing Cash Flow and Reducing Tax Liabilities

For self-employed individuals, who typically experience fluctuating incomes and complex tax assessments, mortgage interest relief is a substantial financial planning benefit. By reducing the amount of tax payable, this relief directly impacts their cash flow, allowing for better financial stability. It essentially lowers the cost of borrowing by reducing the net interest expense of owning a home.

How to Claim Mortgage Interest Relief

If you are self-employed and looking to claim your tax relief on mortgage interest, you can apply with the help of our team here at Tax Returns Plus when we complete your annual income tax return.

Our bespoke templates, which are provided to our clients, will outline the procedure to claim the credit.   Here’s what you will need:

  • Your Mortgage Interest Certificate for 2022 and 2023.
  • Your local property tax number.
  • The value of your outstanding mortgage as of 31st December 2022.

Eligibility Criteria 

The relief is applicable for individuals with a mortgage loan who meet the following criteria:

  • You should have maintained an outstanding mortgage balance ranging from €80,000 to €500,000 as of 31 December 2022.
  • Your mortgage lender must be recognised as a credit information provider by the Central Bank of Ireland.
  • You must have incurred interest on the mortgage during both 2022 and 2023.
  • The interest paid in 2023 should be higher than the amount paid in 2022.
  • The property must be your principal private residence (PPR) i.e not a rental or investment property.

The property associated with the mortgage must also meet specific requirements. 

For the self-employed, the ability to claim this relief can be particularly advantageous if their home also serves as their place of business, partially or fully. However, we always recommend that you review the specific eligibility criteria. 

Who Cannot Claim Mortgage Interest Relief?

Here are some cases where you wouldn’t be eligible:

  • Non-compliant Local Property Tax: If you haven’t met your obligations regarding the Local Property Tax for the residence, you can’t claim the relief.
  • Missing Planning Permissions: The property must have the necessary planning permissions in place. Without them, the relief won’t be available.
  • Overpriced Purchases from Connected Parties: If you bought the property from a relative or close associate for a significantly inflated price, you won’t qualify for the relief.

Apply for Mortgage Interest Relief with Tax Returns Plus

Leveraging mortgage interest tax credit can lead to significant financial benefits, particularly for self-employed individuals who face unique challenges in managing their financial obligations. 

For personalised advice and assistance filing your tax returns, complete our short form now to receive a quote and find out how our team can help you with your Mortgage Interest tax credit this year.

If you found this guide helpful, check out some of our other useful guides.