Now if the average FTB gaff is c.€250k nationally and the average interest is 5% ( with discount in years one) the interest payable in a FULL year is €12, 500
If a couple buy in august , complete 1st september, then they only pay 4 months interest in that year and only get 1/3 of the interest relief. Nevertheless they use up a full years interest relief in those 4 months.
If an individual buys they use up a but more but are still shy of the €10k relief .
Its strikes ole 2Pack that to maximise your tax efficiency **an FTB should only buy at the beginning of the year **and that you have missed the (tax relief) boat for 2008 if you buy now.
A STB couple only gets about €5k relief in a year , if they bought on the 1st of september at €250k and 5% interest they can use up nearly all their tax relief by christmas. ( 12.5k /3 = 4.16k) .
An STB individual with €2.5k of relief can buy in October.
Therefore an FTB couple should buy in January if possible…or complete in January … to use up as much of their tax relief as possible
And individual FTB must buy BY March not AFTER March to get the full €10k
Any FTB buying from today on is sub optimal for tax relief.
Can we have an early selling season for FTBs so EAs ??
It can be solved by creating 3 tax year starts for mortgage tax , 1st Jan , 1st May and 1st Sept .
Full calendar year OR 2/3 vs 1/3 or 1/3 OR 1/3 vs 2/3 and that would be straightforward to administer.
That way your mortgage relief year can straddle 2 tax years and there is no ‘wrong’ time to buy as such.
The way its set up now will distort the market becuase its only optimal for an FTB to tackle the ladder in the early part of the year. Its too late already with 8 months to go, you are wasting valuable tax relief.
An FTB couple Could gain nearly €4,000 in Cash ( = €8000 Before tax) by delaying from December completion to January completion although in My example with a 250k price they only gain nearly 20% of 12500 odd ( less 1/12th) which is about €2200 and not €4000 .
There is no major built in incentive for a STB to delay because they can use up their entire tax allowance in only a small part of the year. The January - December distortion lens becomes even more intense at 6% mortgage rates which is where we are heading now .
On a 250k mortgage at 6% you pay €15,000 interest but ONLY IN A FULL YEAR and get 20% back over a tax year = €3000 .