Section 23 benefits

silver campaign

Hi everyone,
I'm looking around to purchase my first home at present. I'll be buying alone and will be an owner occupier. As i'm from Longford, i've started looking into some of the section 23 developments nearby. Could anyone briefly outline the financial benefits of buying one of these propertys.
Any help would be much appreciated, from an ill informed first time buyer...

rainbowtrout

silver campaign wrote: »

Hi everyone,
I'm looking around to purchase my first home at present. I'll be buying alone and will be an owner occupier. As i'm from Longford, i've started looking into some of the section 23 developments nearby. Could anyone briefly outline the financial benefits of buying one of these propertys.
Any help would be much appreciated, from an ill informed first time buyer...

There are a few advantages and a few catches. First of all if the house meets the building requirements for Section 23, you are entitled to Tax Relief, it's been a few years since i filled in my form, but from what I remember it works out at roughly 10% of the value of the house, which is not the price you pay for the house because the plot of land it's built on is not included ( don't quote me on this, but it's something like that). When you have bought the house it gets inspected by someone from Dept of Environment and once they give it the all clear you get a cert from them, and send it off with Rural Renewal Application to the Revenue, they are pretty efficient if you have all the paperwork correct.

So say you are a single person your cut off point at the moment is €34000 before going onto the higher tax rate, you could expect that to go up to €41k approx (my experience) which works out at about €150 extra in your wage every month, you get that for the first ten years.


Here's the catch, to be entitled to this you must keep your house for the 10 years, if you sell up before this timeyou're meant to pay back what you got for the Rural Renewal incentive for the duration you owned the house, i don't know anyone personally who has done this so I don't know how it works.

The other side of it is, you don't have to apply straight away so you could buy the house and not apply for the S23 and if you sold it I think if the next person is a first time buyer they can claim it instead of you.

If you are planning to live there longterm none of that should matter.

PM if you want to ask more specific questions.

silver campaign

Thanks,
So basically, you'll be coming home with more money in your pocket as you are going to be taxed less from your wages.

Glenbhoy

You should also consider that normally, the tax saving is priced into the price of the property, so the most of the benefit normally goes to the developer.

rainbowtrout

silver campaign wrote: »

Thanks,
So basically, you'll be coming home with more money in your pocket as you are going to be taxed less from your wages.

in a nutshell, yes

The_Conductor

Glenbhoy wrote:

You should also consider that normally, the tax saving is priced into the price of the property, so the most of the benefit normally goes to the developer.

Exactly- if you look at almost identical properties around the corner that do not have the section 23 (or other) relief- you will find they are considerably cheaper than the S23 properties. For a FTB, unless you are definite that you are happy to stay in the property longterm, I would shy away from one of these.

leroy_brown

If you really want to live there then you may do this and get the benefit into your salary, but bear in mind, theres a much more lucrative benefit to be had if you dont actually occupy the place, and let/lease it out under a qualifying lease. Im not sure you want to do this, but as the s23 properties fade away, the existing one may appreciate a lot faster for you. In my experience, this is te case where i actually have some s23 properties, and they have appreciated very very well. Bear in mind it also depends on where they are.

Important note though, if you are to do it this way, then you are not to live in the property, but only let it out. Therefore the two choices in summary:

1. Live in as owner occupier and claim the relief on your salary
2. Let/lease out and maintain the section relief.


Another VERY VERY important point is that if you choose point one above and you decide to sell on the propeerty, than the next buyer does not have ANY relief, but if you take point 2, and you sell it onn, the yes, you can sell onn the relief also.


Hope this helps

silver campaign

Thanks lads, you've all been a great help.
It's not a property I would consider letting.
I've been renting myself for a while and i'm looking to buy my own house to live in. I met an estate agent who done up some rough figures and the savings aren't as big as some people are mentioning, Maybe 150 - 200 euro per month. It all depends what tax bracket your in really.

jdivision

If you're looking to buy as an owner occupier and Section 27 (think) relief is available you can write off half the cost of the house. Most places just say Section 23 but the relief is available to owner occupiers at 50 per cent of the purchase price. If it is purely Section 23, I don't think you get any relief if you're an owner-occupier - the property has to be rented out to benefit.