BRIAN Cowen delivers his much-anticipated budget on 6 December. With the general election only a few months away, and stamp duty now a real political issue, voters eagerly await the minister's changes to the property tax code. Here are 10 suggestions that might make the lives of hardpressed home owners or harder pressed wannabe home owners, a little easier.
1. Increase mortgage interest relief
A single first-time buyer is allowed to claim 4,000 at 20% giving an effective cash saving of 800 per annum.
This, however, is negligible when a first-time buyer of a 400,000 property would pay in the region of 17,000 interest alone in the first year.
2. Extend the first-time buyer period for mortgage interest relief
The first-time buyer only gets the higher amount of relief for seven years. Now that mortgages are for 30, 35 or even 40 years, this should be extended.
3. Radically increase thresholds on stamp duty
At 381,000 most people pay stamp duty at 7.5% (first-time buyers at 6%). This is a very high rate on what is now a low value. Most buyers now pay at 9% above 635,000, which has become the value of a modest house in any Irish city.
4. Abolish stamp duty entirely for first-time buyers
At present first-time buyer's pay a lesser rate of stamp on secondhand properties.
Exempt up to 317,000, 3% to 381,000, 6% to 635,000 and 9% thereafter. These, while better than the normal, are not low rates of stamp.
The thresholds should be radically increased or abolished entirely.
5. Link stamp duty to inflation-index thresholds like inheritance/gift tax
In 2006, a child can receive inheritance or a gift of up to 478,000 tax free from a parent. This increased from 466,000 in 2005. This threshold increases every year by an inflationary index.
There is no reason why stamp-duty thresholds cannot be similarly increased.
6. Pay stamp duty at sliding scale
For income tax in 2006, an individual pays at 20% for the first 32,000 and 42% thereafter. It is sensible that stamp duty would follow suit, eg up to 400,000 exempt, the next 200,000 at 3% the following 200,000 at 4% and so forth.
7. Increase value-ceiling on transfer of site to child
The Finance Act 2001 introduced a relief from Capital Gains Tax on parents who transfer a site to a child where that site is used to construct a principal private residence.
This can be a site on a farm or a garden site in urban areas. This value was set at 254,000 and hasn't been increased since. With the general rise in values, this excludes most sites.
8. Capital gains exemption for parents on transfer of other assets
The exemption from capital gains mentioned above should be extended to the disposal of other assets where the proceeds are given to a child to construct or buy a private residence.
If a person can dispose of a site tax-free, why not shares or a holiday home or other such assets.
9. Incentivise social housing
Property tax incentives, for all their critics, have rebuilt derelict parts of our major cities. They have also resulted in an increased provision of apartments, student housing units, hotels, holiday cottages, etc. Property-tax incentives should be introduced to fund the provision of social-housing units
10. Increase ceiling on rent-aroom relief
A relief was introduced in the 2001 Finance Act allowing home owners to rent out rooms in their private residence tax free. This rental income was also disregarded for the purposes of mortgage interest relief or the capitalgains exemption on the sale of a private residence.
However, the ceiling was set at 7,620 and hasn't been increased since. This ceiling should be radically increased to more accurately reflect average mortgage repayment rates.
Colin Wilson is principal of Wilson Consulting Taxation Advisors, Dun Laoghaire, Co Dublin
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