Pearse Doherty (Donegal, Sinn Fein)
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343. To ask the Minister for Finance the full-year cost of mortgage interest relief against rental income in the years 2020, 2021 and 2022. [13947/23]

Pearse Doherty (Donegal, Sinn Fein)
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344. To ask the Minister for Finance if there is a cap on the total amount of mortgage interest relief that can be claimed by a landlord against rental income; and if he will make a statement on the matter. [13948/23]

Pearse Doherty (Donegal, Sinn Fein)
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345. To ask the Minister for Finance the estimated cost in 2023 of mortgage interest relief against rental income in view of rising mortgage interest rates; if his Department has assessed the increased cost in light of changing monetary policy; and if he will make a statement on the matter. [13949/23]

Pearse Doherty (Donegal, Sinn Fein)
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346. To ask the Minister for Finance the full-year cost of mortgage interest relief against rental income in the years 2016 to 2022, inclusive. [13950/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 343, 344, 345 and 346 together.

Section 97 of the Taxes Consolidation Act 1997 (TCA) sets out the deductions allowable in computing rental income chargeable to income tax or corporation tax under Case V of Schedule D. Income chargeable under Case V is computed on the gross amount of rent receivable less allowable expenses incurred in earning that rent, as specified in section 97(2). Among other things, these expenses include 100% interest relief on loans used to purchase, improve or repair a rental property, colloquially referred to as mortgage interest relief for landlords.

I am advised by Revenue that data on the rental sector including incomes and deductions are compiled and published on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/statistics/income-distributions/rental-income.aspx

However, as a taxpayer’s tax liability is calculated based on the combination of all incomes, reliefs, credits and deductions, Revenue advise that it is not possible to provide an exact tax cost for the allowable interest deduction on loans used to purchase, improve or repair a rental property. This is just one of a suite of allowable expenses which landlords may deduct from their gross rental income and, as a demand-led expenditure, it is not possible to forecast with certainty the expected cost outturn for 2023, particularly in light of recent fluctuations in interest rates.

In order to estimate tentative costs of the measure to date, it is possible to look at the amounts claimed and apply an average marginal rate of tax of 30%. Using this approach, Revenue have provided the table below, which sets out the estimated tax costs of the allowable interest against residential rental income for the years 2016 to 2020 (the most recent year for which fully analysed data are available).

These costs are based on the amounts claimed regardless of the level of residential rental income received. In cases where the rental income was lower than the expenses declared, the full tax cost of each item would not accrue. Therefore, the costs outlined in the table can only be considered as broadly indicative of the estimated tax cost for a given year.

There is currently no cap on the amount of mortgage interest relief that can be claimed by a landlord against rental income, provided that the loan complies with the conditions in section 97(2)(e) of the TCA. Where borrowed money is used to purchase, improve, or repair an entire premises, but only part of the premises is let, the interest must be apportioned between qualifying and non-qualifying interest on a just and reasonable basis; for example, on the basis of the floor area that is let/not let.

Between 7 April 2009 and 31 December 2018 there was a cap on the amount of interest relief that could be claimed as a deduction for rented residential premises. The deduction against rental income was restricted to a percentage of the interest as follows:

· interest accrued on or after 7 April 2009 to 31 December 2016 – 75%;· interest accrued from 1 January 2017 to 31 December 2017 – 80%;· interest accrued from 1 January 2018 to 31 December 2018 – 85%.

Finance Act 2018 restored full deductibility of interest accruing on such loans from 1 January 2019.

In order to qualify for interest deductibility, a rented residential property must be registered with the Residential Tenancies Board. Further guidance as to the deductibility of loan interest in computing rental income is provided for in Tax and Duty Manual Part 04-08-06, available at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-08-06.pdf.