Increase in Mortgage interest-relief for Rental Income

QUESTION

To ask the Minister for Finance the first and full year cost of increasing mortgage interest relief at 5% intervals up to 100% for rental income.

REPLY

As the Deputy will be aware, Finance Act 2016 provided for the phased restoration of full interest deductibility in respect of interest on loans used in the purchase, improvement or repair of rented residential property. This is being done over a 5 year period by way of annual increments of 5%, with the first increase from 75% to 80% having taken effect for interest accruing on or after 1 January 2017, and the second increase from 80% to 85% having taken effect for interest accruing on or after 1 January 2018.

Further annual 5% increments in the rate of deductible interest will apply to interest accruing in each of the years 2019 to 2021 inclusive, and full deductibility will be restored for interest accruing on or after 1 January 2021.

I am advised by Revenue that, based on personal Income Tax returns filed for the year 2015, the latest year for which complete information is available, and making certain assumptions (such as no behavioural change), it is estimated that the cost of increasing the level at which landlords can claim interest repayments against tax for residential rental properties from 80% (the amount allowable in 2017) at 5% intervals is as set out in the table below.
Mortgage Interest         Relief Full Year Cost                   First Year Cost
80-90%                               €22m                                        €12m
80-95%                               €33m                                        €19m
80-100%                             €44m                                        €25m

However, as noted above, the legislation already provides for phased restoration over a 5 year period, with full deductibility restored from 2021, and as such the figures above refer primarily to a cash-flow cost from accelerated implementation.