Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I own a country home outside Dublin. If I make it a sustainable home, how will that affect my property taxes?
A: The short answer is it won’t, said Anna Crowley, an associate at Philip Lee, a Dublin-based law firm.
There’s no way to reduce local property taxes in Ireland by making a home more energy efficient or with other environmentally conscious upgrades, she said.
“From a tax perspective, there’s not really a lot that can be done,” she said. But, there are a few other ways to save a few euros.
One is Ireland’s Home Renovation Incentive (HRI), Ms. Crowley said. The incentive gives landlords and homeowners a tax break for repairs or improvements to their primary residence or a rental property. These changes must be made by tax-compliant contractors and are subject to a 13.5% value-added tax, which will be offset by a tax credit.
With the HRI, qualifying taxpayers receive a 13.5% tax credit on construction work, up to a value of €30,000 (US$37,000). That effectively reduces the rate of value-added tax to zero on the work, according to Ireland’s Citizen Information website. The credit can be set against your income tax over two years.
The HRI applies to all types of renovations, not just those with sustainability in mind, Ms. Crowley said. But even basic work can often have an effect on a home’s energy efficiency. That could include anything from replacing drafty windows or adding insulation to an attic to bathroom and kitchen upgrades that save water or other resources.
These upgrades can be costly, but there are also grants available from the Sustainable Energy Authority of Ireland, Ms. Crowley said. “Even though it’s not tax related, it’s something of interest.”
These grants can be as little as €50 or as much as €6,000 (US$61 to US$7,360), depending on the project, according to the authority’s website. Projects include adding insulation, setting up heating controls to save energy and installing a solar thermal system, among others.
Until recently, there were tax incentives for homeowners who powered their homes with renewable sources of energy, such as solar panels, or wind or hydro turbines, according to Jeremy Robertson a lawyer at Forsters, a U.K. firm.
That has since expired, but homeowners can save on home energy-saving products—including insulation, heat pumps or solar panels. In general, a 20% “value added tax” (“VAT”) is charged on most goods or services in the U.K. But the VAT drops to 5% for qualifying eco-friendly items that have been installed in a home.
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