Mortgage Interest Relief

[apd]

Hi,

Before the introduction of the new Tax Credit System. Am I correct that the way mortgage interest relief was handled was as follows:

If your mortgage interest for the month was 1000 euro, that amount would be deducted from the amount of your salary that was taxable. If you were paying tax at 42%, then you were effectively paying only 580 euro on your mortgage.

How does the system work at the moment? You get a tax credit of about 480 euro at the end of the year? Effectively only a 40 euro per month saving. Is there really such a difference between the two systems?

 

[LDFerguson]

Hi apd,

Mortgage Interest relief is standard rated, i.e. regardless of what rate you pay at, you will only get tax relief at 20%. So if you pay €1,000 interest for the year, you will only get tax relief of €200.00.

Maximum amount of mortgage interest you can claim tax relief on is €2,540 for a single person in the year. First Time Buyers can claim on interest up to €4,000 for the first seven years, reverting to €2,540 each thereafter. All of these rates are for single people - couples can claim twice these amounts.

Liam D Ferguson
www.ferga.com

 

[DarraghDuane]

Another difference now is that you don't have to be paying tax to get the relief whereas previously you had to.