Patrick O'Donovan (Limerick, Fine Gael)
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Question 65: To ask the Minister for Finance if there are tax breaks available to persons (details supplied); and if he will make a statement on the matter. [31266/12]

Michael Noonan (Limerick City, Fine Gael)
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My reply is based on the understanding that your query relates to the tax reliefs available to an individual who owns a dwelling and has rented it out and is also in the process of building a new dwelling that is to be used as his or her principal private residence. I am informed by the Revenue Commissioners that a person in receipt of rental income is assessed to income tax on the profit amount of the rents received (i.e. the gross rents less allowable expenses incurred in earning those rents). In computing the profit amount of the rents received, only those deductions that are specified in section 97(2) of the Taxes Consolidation Act 1997 are allowable. The main deductible expenses are:

* any rent payable by the landlord in the case of a sub-lease;

* the cost to the landlord of any goods provided or services rendered to a tenant;

* the cost of maintenance, repairs, insurance and management of the property;

* part of the interest paid on borrowed money used to purchase, improve or repair the property; and

* payment of local authority rates in the case of rateable properties used for commercial purposes.

The interest paid in respect of the loan used to purchase, improve or repair the property can represent a significant expense. In brief, in arriving at the profit rent for tax purposes, 75% of the interest paid may be set against the gross rent. However, where the landlord has not complied with the registration requirements of the Private Residential Tenancies Board in relation to all tenancies that existed in the particular premises for the relevant tax years, then none of the interest paid may be set against the gross rent to arrive at the profit rent for tax purposes.

In addition, capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 121⁄2% per annum of the actual cost of the fixtures and fittings over a period of 8 years.

As regards a residence under construction, various payments may have to be made throughout the course of construction in respect of which money may have been borrowed (e.g. on purchase of the site and at various stages of the construction). On the understanding that the residence under construction will, when completed, become the individual's sole or main residence, tax relief is generally afforded on the interest paid on monies used to purchase the site and on interest paid on monies used to fund various stages of construction. However, where the residence when completed does not become the sole or main residence of the individual, any tax relief granted on interest paid will be recouped.

As the Deputy may be aware, tax relief on interest paid on qualifying home loans taken out in the period 1 January 2004 to 31 December 2012 will continue up to and including the 2017 tax year. There is no tax relief on interest paid on loans taken out on or after 1 January 2013.