Taxation

What to do about Tax when you buy a house

• Do I need to tell the tax office if I buy a house?
• Can I claim tax relief on my mortgage?
• What is a 'sole' or main residence?
• Does residence only mean a house?
• Can I claim tax relief on a loan for home improvements?
• What can the loan be used for?
• How much tax relief will I get?
• If I sell my house will I have to pay Capital Gains Tax?
• What happens if I had let part of the house or used part of the house for business purposes?
• What happens if my property has "development value"?
• Rent-a-room relief
  
• Help to Buy (HTB) Incentive
  

1. Do I need to tell the tax office if I buy a house?

Yes - you should inform the tax office as soon as possible so that all correspondence can be sent to your new address.

2. Can I claim tax relief on my mortgage?

Home loan Mortgages taken out after 31 December 2020 do not qualify for mortgage interest tax relief.

3. What is a 'sole' or main residence?

A sole or main residence is the residence which is your home for the greater part of the time. It does not have to be owned by you e.g. your parents’ residence may also be your sole or main residence, if you normally live there.

4. Does residence only mean a house?

No. It also includes:

• Apartments/flats
• Any garden or grounds of an ornamental nature which are used along with the house or flat
• A Mobile Home/Caravan - provided it:
  • Is on a permanent site
  • Is of a reasonable size to fulfil the requirements of use as a permanent residence
  • Has electricity and other services supplied to it
  • Is immobilised (i.e. wheels removed and mounted on blocks).

5. Can I claim tax relief on a loan for home improvements?

No

6. What can the loan be used for?

The loan can be used for most work done on the residence except for money spent on furnishings or removable fittings (e.g. light fittings, curtains, carpets etc.). Examples of what the loan may be used for are:

• Extensions, purchase/construction of garage, garden shed, greenhouse etc.
• Construction of driveway, path etc.
• Conversions, painting and decorating
• Upgrading central heating systems & insulations
• Rewiring or replumbing (including bathroom suites)
• Replacing or installing windows
• Purchase and/or installation of burglar/fire alarms
• Purchase and installation of bedroom and kitchen units which are affixed to and become part of the building
• Treatment for damp, dry rot, woodworm etc.
• Landscaping gardens 
• Contributions to group water and sewerage schemes.

7. How much tax relief will I get?

None...The Home Renovation Incentive (HRI) , introduced in 2014 was terminated on 31 December 2018.

8. If I sell my house will I have to pay Capital Gains Tax?

No. If the house (including grounds of up to one acre) has been occupied as your sole or main residence throughout your period of ownership you will be exempt from capital gains tax on the sale.

9. What happens if I had let part of the house or used part of the house for business purposes?

Full exemption may not be due if only part of the house has been used as your residence. In this case an apportionment will be made to arrive at the exempt portion of the total gain and you will have to pay capital gains tax on the balance.

10. What happens if my property has "development value"?

Where your property has development value i.e. if it is sold for a price higher than its normal current use value then the relief from capital gains tax as outlined above is confined to what it would be if the property did not have development value.

11. Rent-a-room relief

Rent a room relief allows you earn up to €14,000 per year tax free if you rent out a room / rooms in your family home to private tenants. A converted garage or self contained unit such as a basement flat that is attached to your home can also qualify for this tax relief. The rental income received must be included in your annual income tax return. To qualify for ‘rent a room relief’ your home must be located in the Ireland and you must occupy it as your sole residence /home during the year of assessment.

12. Help to Buy (HTB) Incentive

If you are a first-time buyer, this incentive will may help you with the deposit you need to purchase or build a new home or apartment. The incentive provides you with a refund of the Income Tax and Deposit Interest Retention Tax (DIRT) you paid over the previous four tax years. HTB is only available to first time buyers where the loan relative to the value (LTV) is 70% or more of the completed value of the property .

Note : *Help to Buy Scheme (HTB) is only available to first-time buyers to help purchase a newly-built house or apartment. It applies to once-off ‘self-build’ homes and to properties that cost €500,000 or less.

HTB scheme is not available for investment properties and cash buyers do not qualify. If you have inherited or have been gifted a property then your eligibility to HTB is not affected.