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Tax Relief for Landlords renting to Social Housing Tenants

Tax Relief for Landlords renting to Social Housing Tenants

From the 1st of January 2016 the government have introduced a 100% interest deduction allowable in respect of Rental property which is let for a period of 3 years to tenants in receipt of certain social housing payments.

The new scheme will allow property owners who rent to tenants in receipt of Rent supplement or the housing assistance payment (HAP) to claim 100% relief on their mortgage interest as an expense against Rental Income. It will also be available to landlords who participate in the rental accommodation scheme(RAS). The new rate compares with 75% relief available up to now.

To qualify, the accommodation must be available to social housing tenants for a minimum of three years and must be registered with the Private Residential Tenancy Board (PRTB). The increased relief will be provided to the landlord retrospectively at the end of the three year period. In some cases it may be necessary for the landlord to apply for certification confirming they have met the terms of the scheme.

Below is an example of the benefit it could provide to Landlords:

Taking an average landlord who has a mortgage of €200,00 at a rate of 5% interest per year under the current guideline:

€200,000                     Mortgage Amount
@ 5%                          Annual Interest Rate
€ 10,000                      Interest Paid per year
€   7,500                      75% of Mortgage Interest allowed as an expense against Rental Income currently

With the new scheme where a landlord does qualify and the landlord receives the benefit it could really affect the landlords tax bill:

€2,500                        Addition Interest allowable
@51%                        Tax Charges-Income Tax 40%, USC 7% & PRSI 4%
€1,250                        The average landlord could expect to save

The new initiative is in place to encourage landlords to let to Social tenants who generally in high demand areas find it impossible to find landlords who will accept rent allowance or HAP.

The entitlement will work on a retrospective basis and therefore below is how it will be awarded:
2016 €10,000 @ 75%
2017 €10,000 @ 75%
2018 €10,000 @ 75%
2019 €10,000 @ 75% + 2016 €10,000 @ 25% + 2017 €10,000 @ 25% + 2018 €10,000 @ 25%

Although the measure was included in the Finance Act and has been in effect since January 1st, the Revenue have just begun implementing it.

 

Breda Lyster,

Rental Income Manager