Landlords to benefit from budget tax break of up to €1,000 with rent tax credit to hit €750

Landlords will benefit from a tax break worth between €600 and €1,000, rising each year for the next four years, as part of a suite of measures seeking to address the country’s housing crisis.

As part of his Budget 2024 speech the Minister for Finance Michael McGrath said housing is “undoubtedly the biggest domestic challenge we face today”.

Mr McGrath announced a number of measures including tax credits, mortgage interest rate relief, an increase in the rate of vacant property tax, and a more than €5 billion capital investment budget for housing.

A total of 86 per cent of landlords in the market own just one or two properties, he said, which is why the government is introducing a temporary tax relief, which will “primarily benefit small landlords”.

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In the first year, €3,000 of landlords’ rental income will be taxed at the standard 20 per cent rate rather than the higher rate, resulting in an additional €600 to the landlord. This will increase to €4,000 in 2025, resulting in a benefit of €800 to landlords, before rising again to €5,000 in both 2026 and 2027, which will result in a €1,000 annual benefit.

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However, Mr McGrath said an “important condition” of the measure is the properties must remain in the market for the full four years, or else the tax will be clawed back.

Of the 5,735 notices to quit issued by landlords in the second quarter of this year, some 63 per cent were as a result of a landlords intention to sell the property, according to the residential tenancies board.

For tenants, the Government announced the rent tax credit will be increased from €500 to €750 next year. There will also be an amendment to the scheme to allow parents who are paying for their children in student accommodation to claim the credit. This will also be backdated.

Homeowners on tracker and variable rate mortgages have faced 10 successive interest rate increases over the past 14 months. To counteract this, the Government will introduce a one-year mortgage interest tax relief for homeowners with an outstanding mortgage balance on their primary home of between €80,000 and €500,000 as of December 31st, 2022.

Relief will be available in respect of the increased interest paid on the mortgage in the calendar year 2023 as compared with the amount paid in 2022, at the standard rate of 20 per cent income tax. The relief will be capped at €1,250 per property, benefiting approximately 165,000 mortgage holders.

Furthermore, the vacant home tax, which was introduced in last year’s budget, will be increased from three to five times the local property tax from next year, while the help-to-buy scheme will be extended until the end of 2025.

The help-to-buy scheme has consistently been criticised by Opposition parties and economists, who have said it could further inflate house prices, and called for it to be scrapped.

Just under €7 billion of funding was allocated to the Department of housing, of which €2.6 billion will be capital investment in housing. This will be supplemented by Land Development Agency (LDA) investment and Housing Finance Agency (HFA) lending, resulting in an overall capital budget of over €5 billion next year.

Some of the measures that will be funded next year through this investment include the construction of 9,300 new build social homes, 6,400 affordable homes and some €242 million being allocated for homeless services and accommodation.

Meanwhile, Minister for Housing Darragh O’Brien informed cabinet colleagues on Tuesday of his intention to seek Cabinet approval for an additional €6.75 billion in funding for the LDA and the HFA.