Mortgage Interest Relief 2023

I know Mortgage Interest Relief isn’t the most exciting topic in the world. But would an extra €1,250 in your pocket excite you? Most of the tax changes in the recent budget apply from 1 January 2024. Not mortgage interest relief though. It applies for 2023. We’ll take a closer look at

1. What it is
2. How do you get it
3. How it works – Examples
4. Watch out for–Tips

What is it?

Mortgage interest relief is a one-year tax credit that applies for 2023. So, a temporary credit for 2023 only. You must have

• An outstanding mortgage balance on
• Your principal private residence of
• Between €80,000 and €500,000 as of
• The 31st of December 2022

You must be compliant with Local Property Tax requirements. You’ll find that the new property related tax breaks all have that rule about being up to date with your LPT.

The most the relief is worth to you is €1,250. Better than a slap in the face with a wet fish! It is available on the increase in mortgage interest paid in 2023 compared to 2022. The amount qualifying for relief is subject to a cap of €6,250 per residence. The relief applies at 20% 

Increase in mortgage interest 2023	€6,250
Tax credit x 20%	€1,250

How do you get it?

You get it by claiming it on a tax return. If you file an annual tax return each year this won’t be a problem. You’ll just need the correct backup information. But if you don’t file a tax return then it can be a bit more complicated. That doesn’t mean you can’t get it. Of course, you can but you may need some help.

You should be able to file your 2023 tax return by the end of January at the latest. We don’t know the exact information Revenue will look for on your 2023 return yet. The following should be there

1. A box to tick the mortgage is on your Principal Private Residence
2. The balance on your mortgage at the end of 2022
3. The amount of interest paid in 2022
4. Amount of interest paid in 2023
5. Address of the property
6. A box to tick to confirm the LPT on the property is up to date

The reason for the tick boxes is to make sure you qualify for the relief in the first place. As in you meet the terms and conditions. If you tick the box and Revenue check that you don’t qualify then you won’t have a leg to stand on!

How it works – Examples

Dan and Mary Brien have a home in Leighlinbridge Co. Carlow. Dan owns 50% of the family company so files an Income Tax return Form 11 every year. The balance on their home mortgage at the end of 2022 was €400,000. They paid mortgage interest of €7,000 in 2022.

They have a tracker mortgage on their home. It was great for years when the interest rates were low. But Dan is cursing the ECB with their 10 mortgage interest rate increases in a row. They were paying €1,350 a month at the start of 2022 and now they are paying €1,900 a month. The mortgage interest cert for 2023 arrives in the post in mid-January 2024. The numbers bring a small tear to his eye. Their mortgage interest in 2023 was €12,500. Mary looks after the LPT so consider it done.

Do they qualify?

Yes, they qualify as

• The mortgage is on their PPR
• The balance at the end of 2022 is €400,000 so between €80,000 and €500,000
• Interest paid in 2023 is greater than the 2022 interest
• Their LPT is up to date

2023 Mortgage Interest paid	€12,500
2022 Mortgage Interest paid	€7,000
Increase in the amount paid	€5,500
Tax credit x 20%	€1,100

PAYE Taxpayer

Emily Flynn is a PAYE taxpayer with a good job in an engineering company. She doesn’t file a tax return every year as she doesn’t have to. Emily has a lovely home in Dungarvan and has a tracker mortgage on that.

The balance on her mortgage at the end of 2022 was €300,000. Her mortgage interest went through the roof in 2023 when she paid €12,000. Her interest bill in 2022 was only €5,000. Those were the days. A few trips to Kildare Village were more affordable back then. She’d break out in a rash if she owed money to Revenue, so the LPT is most definitely up to date.

Does she qualify?

Yes, she qualifies. Emily meets all the rules as outlined above. But the pain for her is that she’ll have to file an Income Tax return form 12 for 2023. She can do this through myAccount in 2024. Her tax relief will be 

2023 Mortgage Interest paid	€12,000
2022 Mortgage Interest paid	€5,000
Increase in the amount paid	€7,000
Max cap applies of	€6,250
Tax credit x 20%	€1,250

Watch out for – Tips

Some of the things to watch out for are in the definitions of Mortgage interest relief. I have no doubt that further guidance will cover off some of the “grey” areas when it comes to this relief. These tips come to mind knowing the different circumstances of our clients.

PPR – Mortgage

A few clients have used their principal private residence to release equity. This could be to pay off more expensive debt or to buy a second property. In these cases, it will only be the outstanding mortgage on the PPR element at the end of 2022 that will apply. Likewise, it will only be the interest on the PPR element that will qualify.

In such circumstances, the taxpayer will need to calculate the correct closing balance at the end of 2022. Plus, calculate the interest that relates to the PPR at the end of both 2022 and 2023. The onus will be on the taxpayer to make accurate calculations. Revenue can request the backup to the numbers and mortgage documentation.

Interest Paid

The definition refers to interest paid. So, you must have paid the interest. Interest charged but not paid won’t qualify. Unfortunately, some taxpayers will have gone into arrears in 2023. The interest they paid can be less than the interest charged. In such cases, it will be important to have detailed mortgage statements for the two years.

Credit against 2023 tax liability

The relief operates by giving you a credit against your 2023 Income tax liability. If you have no liability, great. But if you do, it will reduce it. Some PAYE workers, like Emily, won’t be familiar with filing a tax return. If she has underpaid tax in previous years or has other income to declare in 2023 then that needs to be on her return.

There are opportunities here too. For example, a taxpayer who never files a tax return could be in a larger tax refund position for 2023. By availing of all your tax credits  you can maximise your tax refund. Other common credits would include medical expenses, medical insurance and third level costs.

Paperwork

Having good paperwork to back up your claim will make it easier for you or your tax advisor to claim. Hold onto those mortgage interest statements and statements that show the monthly transactions. Normally this paperwork comes through the door early in the new year. Mind it with your life. You’ll need it later in the year and it will save you time and money.

I have a mortgage with Ulster Bank. As you know they exited the country, and I got a book of paper showing every monthly transaction from the time I took it out. That mortgage transferred over to AIB months ago and I’ve got nothing from them since. I could look up all the transactions on the Ulster Bank website, but that facility isn’t there with AIB. So, our banks need to ensure their customers get the information they need when they need it.

We send a tax checklist to all our clients each year. We’ll have to expand the 2023 checklist to ensure our clients benefit from mortgage interest relief for 2023.

Do you need help to claim this tax credit and ensure your tax return is right? If so, start here