Written answers

Tuesday, 14 February 2012

9:00 pm

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
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Question 181: To ask the Minister for Finance in view of the financial difficulties arising from the extraordinary economic and financial situation being experienced by persons who purchased a second residential property as a means of securing funds for retirement and so forth, if he will consider increasing the amount claimable of mortgage interest against tax from 75% to 100%, particularly as the cost of running a non-residential property is a legitimate business expense. [8411/12]

Photo of Michael NoonanMichael Noonan (Minister, Department of Finance; Limerick City, Fine Gael)
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As the Deputy notes an individual who rents out their residential property may be allowed a deduction (subject to certain conditions) in computing the taxable rents from that letting of 75% of the interest accruing on money borrowed to purchase, improve or repair that property. The level at which interest repayments could be claimed against tax for residential rental properties was reduced from 100% to 75% in April 2009 as part of an urgent revenue-raising package aimed at stabilising the public finances. The restriction, which applies to interest accruing on or after 7 April 2009, significantly reduced the cost of this relief to the Exchequer.

I am informed by the Revenue Commissioners that the amount of tax foregone in 2009 (the most recent year available) by allowing a deduction for interest on borrowings to be offset against all rental income assessable under Case V, Schedule D for both residential and commercial property was estimated at €745 million. Increasing the relief for residential properties to 100% could result in an additional annual cost to the Exchequer of the order of €100 million.

The need to stabilise public expenditure, which formed the backdrop to the introduction of the 2009 restriction, still exists. The terms of the EU/IMF Programme of Financial Support for Ireland commit the State to further substantial decreases in public expenditure. While tax expenditures in many areas have been reduced to broaden the tax base, a 25% restriction on the allowable interest available to residential landlords does not seem excessive and I have no plans to undo the 2009 Act provision.

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