Does my studio flat qualify for the rent tax credit?

Do studios qualify for €800 payment? My studio includes its own WC/shower/washhand basin, a mini kitchen including washing machine, mini cooker, microwave, fridge freezer, electric radiators and own electric meter, smoke alarm, fire blanket, window restricters and first-floor own access.

Mr S.G.

I’m not sure why you would think it would not qualify for the credit, which is €500 by the way, not €800, but your query raises a wider issue. Why are people not automatically applying for the credit anyway?

It was brought in at the last budget as an initial step to help defray the high cost of renting in Ireland following significant lobbying on the issue.

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Rents in Ireland are at record levels. The most recent report from the Residential Tenancies Board (RTB), which monitors such things, said rents across the State for new tenancies jumped by almost 9 per cent in the year to the end of the first quarter. The average monthly rent now stands at €1,544.

In Dublin, even though the annual increase was marginally more modest – at 8 per cent – the average monthly rent on new tenancies signed in the first three months of the year was more than €2,000, at €2,102.

Yes, the average rent on existing tenancies will be slightly lower than those figures. But they are based on more than 14,000 new leases signed in the first quarter across the State and registered, as they need to be, with the RTB.

More importantly for many people, the levels of rent is now higher than mortgage payments would be on the same property. However, tenants who would otherwise consider buying are not able to do so because the supply of homes on the market is tight and Central Bank rules limit what they can borrow as a multiple of their salary. There’s also the not insignificant factor that rising interest rates over the past 15 months are raising serviceability issues for people.

[ How do I claim the €500 rent relief that I’m entitled to? ]

Those Central Bank limits are there for all the right reasons – mostly because the regulator cannot trust banks not to permit borrowers to take on excessive debt that may lead to significant problems with arrears should interest rates keep rising, or should their personal finances run into trouble. But you still have people paying more in rent than they would in a mortgage, which is counterintuitive.

So it is easy to see why Government would feel under pressure to offer some support to renters. From the outset, it was seen as a credit that could be increased over subsequent years and, with the housing crisis as high-profile now as it was before last year’s budget, increasing the rent tax credit will be on the Minister for Finance’s wishlist as he juggles the numbers ahead of his budget speech next month. The number swirling around in the rumour mill is €800.

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What might deter him from raising the amount offered, however, is the extraordinarily poor take-up of the credit by tenants across the State.

Figures published recently showed that, as of July 9th, just over half the estimated number of eligible tenants have applied for the credit – under 210,000 of the 400,000 expected. Of these, 186,180 have applied for 2022, 7,221 for this year and just 16,342 for both years.

[ All you need-to-know about the Rent Tax Credit ]

Either people’s need is nowhere as great as was supposed, or something else is at play. A survey by advisers taxback.com found that close to four in 10 tenants were having issues with landlords.

Just under one in six people said they had no way of proving their claim because they pay their rent in cash and had not been given receipts by their landlords. If so, the landlords are operating outside the rules put in place by the RTB.

One in 10 landlords was not registered with the RTB and therefore their tenants were not eligible (though these fall outside the 400,000 claims expected).

A further one in eight said they were too “uncomfortable” to ask their landlord for the information required to make a claim, which is daft. Landlords know the importance of availing of reliefs against tax and, in any case, assuming they are RTB-registered, tenants claiming the credit in no way disadvantages the landlord.

Finally, one in five respondents said they simply had not got around to making a claim. Fair enough. That cohort obviously doesn’t really need the money then.

So there are a lot of people out there yet to claim, and you are one of them, it appears.

There is nothing in the legislation to disbar studio apartments. All it does say is that this must be your home – what Revenue calls your “principal private residence”. It could be an entire property – or simply rooms within a property. The other key requirement, unless it is “digs” or a “rent-a-room” arrangement (neither of which seems to be the case here), is that the tenancy must be registered with the RTB.

[ Rent Tax Credit: Why aren’t more renters claiming it? ]

If your landlord is a housing association or an “approved housing body”, you are excluded, as is the case if you are already in receipt of State assistance with accommodation costs through schemes such as HAP (the Housing Assistance Payment), rent supplement or the rental accommodation scheme. You are also excluded if the landlord of your private rented accommodation is your parent.

That aside, you are entitled to €500 tax credit every year from 2022 to 2025 – although the scheme may well be extended by then and the amount available increased. To claim, you need to file a tax return for the relevant tax year but, with a little bit of organisation, this really is not as daunting as some people appear to believe it is.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice