A Guide to the New Mortgage Interest Tax Credit

by | Jan 23, 2024 | General

In Budget 2024, a temporary Mortgage Interest Tax Credit (MITC) was announced to be introduced for eligible homeowners. This credit, applicable for the 2023 tax year, aims to provide financial relief to certain taxpayers with mortgage balances between €80,000 and €500,000 as of December 31, 2022.

Below we cover the key details you need to know –

  1. Eligibility Criteria:
    • Taxpayers with mortgage balances between €80,000 and €500,000 as of December 31, 2022.
    • The credit applies only to the 2023 tax year.
    • The relief is based on the increase in interest paid in 2023 compared to 2022, subject to a cap of €6,250.
    • The relief is at the standard rate of Income Tax (20%), resulting in a maximum tax credit of €1,250 per property.
  2. Property Qualification:
    • The credit is available for qualifying properties, including the individual’s primary residence, former or separated spouse or civil partner’s residence, or a dependent relative’s residence.
    • The relief extends to residential properties used to support the individual’s trade, profession, employment, or office holding.
  3. Claiming the MITC:
    • To be eligible, individuals must have paid interest on a qualifying loan in both 2022 and 2023.
    • Local Property Tax obligations for the property must be fulfilled.
  4. Calculating the MITC:
    • The formula used is (A-B) x 20%, where A is qualifying interest paid in 2023, and B is qualifying interest paid in 2022.
Example:

Joe, a homeowner with an outstanding mortgage balance of €320,000 on December 31, 2022, fulfils all qualifying conditions. He can claim the MITC on the increase in interest paid on the qualifying loan in 2023, subject to the cap of €6,250.

John’s MITC
John’s 2023 Interest paid (A) €12,000
John’s 2022 Interest paid (B) €9,000
A-B €3,000
MITC at 20% €600

 

5.Special Cases:

    • The MITC may be available for properties used by a dependant relative, former or separated spouse or civil partner, or for facilitating trade, profession, employment, or office holding.

6.Documentation and Claim Process:

    • To claim the MITC for the 2023 tax year, individuals must file an Income Tax Return.
    • Anticipated availability of the Income Tax Return for MITC claims is late January 2024.
    • Required documents include Certificates of Mortgage Interest for 2022 and 2023, and confirmation of the mortgage balance as of December 31, 2022.
    • Documents can be uploaded through Revenue’s online services.

The introduction of the Mortgage Interest Relief Credit is a positive step towards easing the financial burden for eligible homeowners. Stay tuned for further information from Revenue as they release details on the application process. This credit can make a significant impact on your 2023 tax return, providing valuable relief to homeowners meeting the specified criteria.