Fianna Fáil Press Office
Michael McGrath TD
Spokesperson on Finance
26 December 2015
Fianna Fáil manifesto aims to help thousands of accidental landlords
Huge financial burden on families forced to rent out their home
Fianna Fáil’s forthcoming election manifesto will include a pledge to assist thousands of families who are forced through personal circumstances to rent out the house or apartment they originally bought as their home.
Finance spokesperson Deputy Michael McGrath commented “Many people who bought in the period 2000 to 2009 now find that as a result of changed family circumstances their homes no longer meet their needs. In the absence of being able to sell, many families are forced to rent their home and in turn rent a new property for themselves.
“Anyone that takes this course of action faces a mind boggling array of charges including income tax, universal social charge, local property tax, PRSI and fees to the Private Residential Tenancies Board. They also face losing their mortgage interest relief and their tracker rate, if they are lucky enough to have one.
“Few in this scenario envisaged that they would become landlords and have to deal with all the challenges that brings. Their main concern is earning enough to look after their family. However many accidental landlords face a tax bill of up to €2,000 per annum.
“The income tax system already distinguishes between different categories of landlord. A person who rents out a room in their home can earn up to €12,000 annually, tax free.
“We propose extending this concept to accidental landlords. This would be done by means of a simple change to the income tax code which would allow people who bought their house between 2000 and 2009, who have now moved out and are themselves renting another house, to offset this rental payment against the rental income they receive for a period of 3 years. In practical terms this would substantially reduce or eliminate the tax bill on their rental income.”
Restrictions on the relief would include:
- It would be limited to people who purchased their principal private residence between 2000 and 2009 and are no longer resident in the property.
- This would only be available in respect of a property that was someone’s principal private residence. It would not be a subsidy to investors.
- Only allowable in respect of rent incurred on properties up to €2,000 per month to a maximum of 75% of the monthly rental expense.
- The maximum period this deduction would be allowed for would be for 3 years or until the property is sold.
Changes introduced at the start of 2015 have made it harder for families to trade up or move house when their circumstances dictate it as second time buyers need a deposit of 20 per cent of the full purchase price of a new home. This is simply beyond the means of many families who have seen the equity depleted in their home. High childcare costs and excessive variable mortgage rates severely limit the ability of couples to trade up to a more suitable home. That is why we believe there is a need for a temporary change to the tax code to take some of the pressure off these households who are already struggling to keep their head above water.
“We estimate the cost of this to be €27m in the first year and would benefit 20,000 people. While they will continue to face other financial challenges it would considerably ease the burden faced by families in this situation,” concluded Deputy McGrath.