Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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134. To ask the Minister for Finance the cost over the next five years of increasing mortgage interest relief for landlords to 100%; and if he will make a statement on the matter. [2544/17]

Michael Noonan (Limerick City, Fine Gael)
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A landlord in receipt of rental income is assessed to income tax on their net profit after deduction of 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.

Interest on money borrowed to purchase, repair or improve the premises is specified as an allowable deduction, but subject to certain restrictions.  A landlord is entitled to claim a deduction for 100% of qualifying interest in respect of a rented commercial premises but, between 2009 and 2016, in general only 75% of qualifying interest was allowable in respect of rented residential property.  I provided in Budget 2017 for the restoration of 100% interest deductibility on a phased basis over 5 years, commencing from 1 January 2017.  The deduction available in respect of interest accrued in 2017 on a loan relating to a residential rental property is 80% of qualifying interest.

Interest paid on monies borrowed to purchase, repair or improve a rental premises is generally accepted as being a legitimate rental expense.  The restriction to 75% deductibility in respect of residential rental property was introduced as part of the revenue-raising package in Finance Act 2009 required to stabilise the public finances.  However in view of the current rental accommodation shortages, it was my view that it was appropriate to revisit this measure in Budget 2017.  Restoration of full interest relief on borrowings for residential landlords was also recommended in the DKM Consultants 2014 report "Rent Stability in the Private Rented Sector" prepared for the Housing Agency on behalf of the Private Residential Tenancies Board.  The report noted that the restriction could create market distortions in favour of cash buyers and investment in commercial property where unrestricted deduction for qualifying interest is still available.

I am advised by Revenue that, based on personal Income Tax returns filed for the year 2014, the latest year for which complete information is available, and making certain assumptions about the data, it is estimated that the cost of increasing the level at which landlords can claim interest repayments against tax for residential rental properties from the current 2017 level of 80% to 100% is in the order of €56 million per annum on a full-year basis.

It should be noted that this estimate does not include the cost associated with the increase in the level of qualifying rental interest payments from 75% to 80%, which amounted to €14 million on a full year basis.