Do your home work: how tax relief scheme works
It was a welcome announcement in last month’s budget and amounts to a 13.5 per cent reduction on home renovations. How does it work?
If I spend €30,000 in two different years can I claim the credit twice?
No, it is a “lifetime” limit and is the maximum you can claim over the life of the scheme.
I’m looking to upgrade my boiler. Can I claim a tax credit under the incentive as well as claiming and receiving an SEAI Grant?
Yes. And no. According to the Revenue, you can claim twice on eligible work, but any grant you receive will be disregarded from the qualifying amount by a multiple of three. So, for example, if you spend €10,000 ex-VAT but also receive a grant of €1,000 to upgrade your property, then you will only be available to claim relief on €7,000 (ie €10,000 – (€1,000x3)), for an additional benefit of €945. Similarly, if you receive an insurance payment which you put towards the cost of an upgrade, the full amount of this payment will be disallowed.
Can I borrow money to avail of the scheme?
Yes. Bank of Ireland has reacted to the scheme by launching a new €75 million fund to lend to customers. But remember, the cost of borrowing (9.9 per cent for a personal loan/up to 4.6 per cent for a mortgage top-up with BofI) will negate the value of the scheme.
Will home renovations increase my property tax?
No. The valuation you already gave for your home will stay the same until 2016 no matter what improvements you make to it. Thereafter, however, you will have to apply a new valuation to your property and if your house has increased in value, it might kick in then.
Can I use any contractor?
The aim of the scheme is to cut down on so-called “cowboy builders” by bringing more into the tax net. So, before hiring anyone you need to ensure they are tax compliant. Ask to see a Notification of Determination of RCT Rate showing zero or 20 per cent RCT Rate which means they are tax compliant. It should be dated within the previous 30 days. Once the Revenue’s online system is in place, you will be able to check here. Remember, if the contractor is not compliant, you won’t be able to claim your VAT back.
Is there a downside?
Like all tax measures aimed at boosting demand, the introduction of the relief may put upward pressure on prices – so while you gain from the tax relief, you might end up paying a similar amount anyway. Be sure to shop around.
For more, see revenue.ie