How is TRS calculated?

TRS or Tax Relief at Source, is a mortgage related tax relief available to first time buyers. The working elements of it will be described in today’s post.

When you draw down a mortgage, if you are a qualifying applicant, then you can then apply for your TRS by downloading the TRS1p form from the Revenue website. After you send it off it will take a few weeks to process, and then you will get the years tax relief averaged out over the remainder of the year.

For example (we’ll show the calculations later) if your mortgage drew down in January but your TRS only kicked in during March then the relief would be paid as the average of 12 months over 9 months – say it was meant to be  €300 per month (had it started in January) then you’d be getting  €400 per month for the remainder of the partial year.

The actual way to calculate TRS is by looking at the amount of qualifying mortgage interest. The rules are that you can claim (remember this post is specifically for first time buyers) for the first seven years of your mortgage and the amount applicable is 25% of the allowable interest in year 1 & 2, then 22.5% in years 3, 4 &  5, finally years 6 & 7 are at 20%. The amount of interest you can apply this to is €10,000 per person qualifying.

So if two people buy a house and they are both first time buyers then the maximum mortgage interest allowable for TRS purposes would be €20,000.

It is important to note that if your mortgage interest is less than the maximum then the lower amount of interest is what applies in the calculation. We’ll do an example.

Example 1:

Joe and Tina buy a house for €250,000 with a 90% mortgage, they opt for a 5 year fixed rate of 4%. Their mortgage amount is €225,000 and at 4% that means they will pay €9,000 in interest for the year, this is well below their threshold, however, because it is below the threshold we do the calculations based on the actual interest paid rather than on the maximum.

There are a few other examples, including those that would apply to qualifying non-first time buyers on the Revenue website you can check them out here.

Comments

  1. I find it absolutely amazing with the differences between Ireland and the UK with mortgage law. I see that a few years ago a few lenders from the UK tried to break into the market but all seemed to fail drastically.

    When we were working in your country, I found your approach to credit rating was second to none, things are too complex here. We have some lenders taking scores whilst others just look at bank balances etc. There is no standard 🙁

    Anyway, nice post and would like to add you to my blog roll as a source of quality information for our neighbours 🙂

  2. olive anne hayden

    I have a query, I received a letter from Revenue saying that I owed them 3142.00e for TRS allowed to me for past two years, I have let a room in my apartment but did not fill in tax form (didnt realise had to do this) Revenue sent me out self assessment form to fill in and I did so telling them I was claiming Rent a Room scheme, I had been paid over 10,000 in rent and was therefore over the ceiling allowed, they then phoned me to say that I stll owe the 3142.00e its as though they dont believe me, I think this is unfair and asked to speak to someone in authority but so far nothing, do I have any rights in this case, would appreciate any help you can give me , thanks Anne

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