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Mortgages

Majority unaware of housing-related tax relief which could save them thousands

Conor Dever

Conor Dever

Staff Writer

A recent survey shows that not only do most people not understand how much tax relief they could be getting, most people don’t even know what the schemes are at all.

The housing market is in a pretty precarious position, so you'd think that homeowners and prospective homeowners would bone up on all of the information that could possibly save them money. 

But according to a recent survey carried out by taxback.com, a large proportion of the public are unaware of the housing-related tax relief they could be entitled to and which could save them thousands. 

So let’s take a closer look at the facts and figures…

What the survey found

When asked: “Which of the following is your understanding of the Home Renovation Incentive (HRI)?” the most common answer was “I’ve no idea”, with 40% of those surveyed picking this option.

Things seem to be even worse when it comes to the Rent-a-Room scheme. When asked: “How much income can you receive under the Rent-a-Room scheme without paying any tax?” a whopping six in 10 simply answered: “I don’t know what that is”.

It seems people are a little more aware of the Housing Assistance Payment (HAP), as 67% were able to answer accurately what it was.

Surprisingly, despite all the talk in the media around the housing market and getting on the property ladder, people are not as familiar with the Help-to-Buy (HTB) incentive, with only 44% of people correctly stating that it applies to first-time buyers. 

So what housing-related tax relief is available?

Rent-a-Room Scheme

If you rent out a room(s) in your home to private tenants, you can qualify for rent-a-room relief.

This relief allows you to earn up to €14,000 in rent each year without having to pay any tax whatsoever on it.

A self-contained unit such as a basement flat or a converted garage attached to your home can also qualify for this relief.

The payment only applies if the room is in your principal residence and within the Republic of Ireland.

Housing Assistance Payment

HAP is a form of social housing support, available to those on local authority housing lists. HAP tenants must find their own accommodation in the private rental market and the landlord must agree to rent their property to the HAP tenant.

Payments are then made on a monthly basis to the landlord by the local authority. The payment is subject to terms and conditions including rent limits, and that the HAP tenant pays their rent contribution to the local authority. Rent contributions will generally be made through An Post’s Household Budget Scheme.

If the HAP tenant doesn't pay their rent contribution, HAP payments to their landlord will be suspended and eventually stopped.

The Home Renovation Incentive

The HRI is a scheme that provides tax relief for home owners and non-corporate landlords who are carrying out home improvement works on their main home or rental property. Introduced in 2014, the scheme allows for tax relief in the form of a 13.5% income tax credit on qualifying works, repairs and renovations.

The work you get done must cost at least €4,405 before VAT at 13.5%, which comes to a total of €5,000 with VAT included. You can claim the HRI tax credit up to a maximum of €30,000 (before VAT) of your total cost.

The relief applies to both PAYE and self-employed workers.

So basically if you get work done in your home that costs between €4,405 and €30,000 before VAT you can claim back some income tax that you've paid to help reduce the overall costs. 

Help-to-Buy Incentive

The Help-to-Buy (HTB) incentive is a scheme for first-time property buyers to help them with the deposit needed to buy or build their home.

As long as you've paid enough income tax in the proceeding four years, you can get up to €20,000 (or 5% of the price of your new home, whichever is the lesser) back in tax from the Government.

Other criteria are that you must:

  • be a first-time buyer
  • buy or build a new property between 19 July 2016 and 31 December 2019 (though the scheme may be extended)
  • live in the property as your main home for five years after you buy or build it
  • be tax compliant. If you are self-assessed you must also have tax clearance

Commenting on the survey, Eileen Devereaux of Taxback.com said: "The findings of this survey are particularly important for two reasons – first, because they mean that some people could be missing out on the reliefs available to them, due to a lack of awareness or understanding.

Secondly, reliefs such as Rent-a-Room could help to alleviate some of the current congestion problems in our rental sector, and could help, to some degree, to take pressure off the market which could have a knock on affect on costs, availability etc. However, if 60% of people don’t know this solution is out there – then how can it be used to fix any problems?”

Commenting on the HRI and HTB Incentive, Eileen adds: "only 34% of people know what the Home Renovation Incentive is – this is a relief that could be of benefit to thousands of homeowners throughout the country [and] even though the media appears to be dominated by discussions around mortgages and property and rates etc., over half (56%) of respondents were not aware that the Help-to-Buy (HTB) scheme exists to help first-time buyers." 

No surprise perhaps that the number of HTB applications to the end of 2018 totalled just 16,133.

Get in touch

What do you think? Were you aware of all the tax relief that's available to homeowners?

Get in touch and let us know. Comment below, tweet us @bonkers_ie or message us on Facebook, YouTube or Instagram. 

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