Under the current Revenue rules, there are three basic taxes/reliefs you should consider when looking at buying your first home in 2012.
Stamp Duty: For residential purchases, stamp duty remained unchanged in the recent budget. If you are buying a residential property for less than €1,000,000 you will incur stamp duty fees of 1%. This 1% applies regardless of whether you are a first time buyer, owner occupier or investor. Basically, it’s a straight 1% charge across the board.
Mortgage Interest Relief: The budget did introduce some changes in the area of mortgage interest relief. Mortgage interest relief is tax relief given on the interest portion of your mortgage repayments. Mortgage interest relief is only available for qualifying mortgages which includes a mortgage on your first home where you will be living in the property.
This relief is paid at source by your bank or building society. This means that your bank will either reduce your monthly mortgage repayment or give you a separate credit payment into your bank account. You do not have to be earning a taxable income to qualify for mortgage interest relief.
Tax relief is only available up to the maximum allowance. The ceilings or upper thresholds on the amount of interest paid that qualifies for tax relief depend on whether you are single, married or in a civil partnership and also on whether you are a first time buyer.
As a first time buyer in 2012, if you are married/widowed/
For the first two years of the mortgage repayments, you will get 25% relief, for years 3,4 and 5 you will get 22.5% relief and for years 6 and 7 you will get 20% relief.
It’s important to be aware that the Government is phasing out mortgage interest relief. Mortgages taken out after 31st December 2012 will not qualify for mortgage interest relief.
Household Charge: Finally, you’ve probably heard some details of the new Household Charge introduced by the Government in the budget. This is a new property tax which comes into effect from the 1st January 2012. The 2012 Household Charge amount has been set at €100 a year. The Household Tax will have to be paid before March 31st in each year of liability to avoid penalty charges. The method for assessing liability for this household charge is likely to change next year, but for now it is a standard €100 for each household.
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Taylor Solicitors is a Cork-based legal firm led by Eleanora Taylor offering specialist advice in business and property law.