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

The difficulties in the rental market are well documented, with the challenge of finding a rental property – particularly an affordable property – a big issue amid concerns in many households over the imminent ending of the eviction ban.

Last year, the Government sought to relieve some of the burden facing renters by reintroducing a rent credit. New data collected as part of the claiming process shines a light on just who is renting in Ireland – how old they are, where they’re renting and how much they earn.

But the figures also beg the question as to why more people aren’t claiming the credit?

The credit, which was reintroduced in last year’s budget to relieve the pressure on overburdened tenants by cutting their tax bills, applies both for 2022 and each of the years up to 2025. It is worth up to €500 a year for single people and up to €1,000 a year for married couples and civil partners.

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The credit was previously applied at a maximum rate of €360 a year (or €720 for a pensioner), but was steadily reduced in the years up to 2017 before being abolished that year.

PAYE workers can claim the credit at any time during the year via the ‘Manage your tax 2023′ option in Revenue’s myAccount facility.

Who’s claiming the credit?

Renters were able to claim the credit from the start of this year and Revenue has published data derived from these tax returns, which shines a light on just who is renting in Ireland today.

Firstly, despite record rents, the income of the typical renter isn’t substantial enough to meet the level of rent currently being sought in some parts of the State, with the data pointing to a median income of €30,000-€40,000.

Given average rents of €2,022 in Dublin, and €1,164 outside the capital, for new tenancies according to the Residential Tenancies Board rent index, and monthly net income of between €2,146 and €2,742 based on those median salary levels, the figures clearly show the financial pressures renters are facing.

Based on Revenue returns, 86 per cent of renters earn less than €70,000 a year.

But there are some people renting and claiming the credit who earn incomes significantly in excess of national averages. The figures show, for example, that there were 185 taxpayers renting who earned more than €250,000 last year, with a further 341 in the €200,001-€250,000 income cohort.

However, those earning €100,000 and over still accounted for less than 5 per cent of the overall total; which makes one wonder who is paying those stellar Dublin rents.

[ On the Money: the personal finance newsletter from The Irish Times ]

The age of renters, as indicated by those claiming the rent credit, is skewed towards a younger population, as might be expected, with a median age of between 25 and 34 and just 529 renters over the age of 65.

More than half of all renters are aged between 25 and 34, with almost 100,000 tax credit claimants falling into this age category. Overall, almost 90 per cent of those claiming the credit are 44 or younger, with a sizeable cohort, some 12.3 per cent, aged 24 or younger.

When it comes to gender, it’s fairly evenly split, with more men (94,379) than women (88,634) renting and claiming the credit.

Unsurprisingly, the vast majority of those claiming the credit are based in Dublin, at 47 per cent of the total (86,819), followed by Cork (11.3 per cent or 20,760), Galway (7.3 per cent or 13,338) and Limerick (4.9 per cent or 8,931).

The county with the fewest people renting is also the county with the smallest population – Leitrim. According to the figures, just 557 people claiming the credit said they rented in the county, representing just 0.3 per cent of the total. It’s followed by Longford (990) and Monaghan (1,067).

The figures also give an insight into how long people have been renting a property. More than half of everyone claiming the credit for 2022 has been renting their current home for three years or less – and with newer tenants more likely to be paying higher market rents, it shows the extent of the higher rent issue.

Indeed almost one in five (18 per cent) of those claiming the credit have been in their current home for less than a year.

Just 7.4 per cent, or some 13,117 tenants, have been in their current home for 10 or more years, with less than a quarter, or 23 per cent, renting current property for five years or more.

Absent claims

Against a background of record rents, one would expect a high application rate for the new credit. The latest Residential Tenancies Board rent index, for the third quarter of 2022, gives an average figure of €1,482 a month for rents agreed on new tenancies. In Dublin, the figure stood at €2,022, falling to €1,164 outside the capital.

The last time the rent tax credit scheme was in operation, it peaked in 2008 when Revenue figures show some 221,000 tenants claimed the relief. In its last year of operation, 2017, just 117,100 tenants obtained the relief, although this is largely due to the fact that eligibility had become far more restrictive.

This time the estimates are far greater – perhaps due to the growing population of people renting and other factors including the fact that students are included.

When launching the credit last autumn, the Department of Finance estimated that up to 400,000 tenants might be eligible to claim. The latest figures from Revenue show that, as of March 13th, only 190,000 tenants have thus far claimed the credit – less than half of what was expected, however. So why might this be?

Well, first of all, to claim the credit, the landlord letting the property has to be registered with the Residential Tenancies Board (RTB). Some experts suggest there remains a significant cohort of landlords who have not yet registered with the RTB, despite the legal requirement to do so.

If a landlord isn’t registered with the RTB, they won’t be bound by rent pressure zone rules, their property may not be notified to Revenue which may have income tax implications and they may be accepting rent on a cash-only basis.

Marian Ryan, consumer tax manager with Taxback.com agrees, arguing that some of their clients have “hit a wall” when trying to claim their credit, “simply because their own landlord hasn’t registered the tenancy with the RTB”.

“It can be very difficult, if not impossible, for a tenant to challenge such a landlord and request the landlord registers the tenancy. In practice, the tenant could risk losing their rental accommodation if they do so,” she says.

[ More that 3,000 HAP households in rent arrears since the establishment of the scheme ]

[ Average rent nationally was €1,482 at the end of last year - RTB ]

There are also people who may not be aware of the credit. Latest figures from the RTB for example, show that there were 276,223 properties registered with it at the end of 2021 (a spokesman says it expects to have updated data available by the second half of 2023), which means that just two-thirds of those potentially eligible have claimed the relief to date.

A further reason may be that, to claim the credit, you must have an income tax liability to offset against it. Minister for Finance Michael McGrath told the Dáil recently that in the case of a single person, you must have paid €3,900 in tax in 2022, and €4,050 in 2023, to get any benefit from the relief.

This means there is a cohort of renters – those earning the State pension for example – who won’t benefit at all from the rent credit.

Revenue figures show almost 10,000 people who earned €10,000 or less in gross income applied for the credit for 2022 – but received zero benefit, as they hadn’t paid enough income tax to benefit. Similarly, almost 20,000 people earning between €10,000 and €20,000 applied but received an average benefit of just €81, again most likely because they hadn’t paid enough tax.

The Revenue data also does not yet include claims by self-assessed taxpayers, as they can claim their rent credit only when they file their 2022 tax returns next October/November, meaning they won’t yet feature in the data.

It’s also likely that international students aren’t able to claim the rent credit, firstly because they may not have earned enough themselves in Ireland to have paid sufficient tax and, secondly, because their parents likely won’t have either if they are not tax resident in Ireland.

Table: Who is the typical renter in Ireland?

Age: 25-34

Lives: Dublin, Cork or Galway

Income: Between €30,000-€40,000 a year

Source: Revenue