Extensions 'may attract extra property tax'

rubberdiddies

breakingnews.ie wrote:

Finance Minister Michael Noonan has said people who invest in their homes by adding extensions may have to pay extra property tax.

The new tax which comes into effect later this year will be self-assessed, but based on the value of the property.

Responding to questions in the Dáil, the Finance Minister said if an owner increases the value of his or her property by building on, they will be liable for extra tax.

"If you have an extension built and all your neighbours are saying 'My house is between €150,000 and €200,000, but you put another €75,000 (or so) onto it by way of extension, then the normal thing is you go up to the next band, and the tax will apply (at the higher rate)," he said.

well that's one way to completely kill off the building trade in this country, which is already on it's knees. Struggling small builders who rely on attic conversions, extension etc will be the hardest hit by this. Clownism as it's finest!

AlmightyCushion

Is anyone surprised by this? The tax is based on the value of the house, if something happens that increases the value of the house, it only make sense that it may affect the amount of tax you have to pay.

Luca Brasi

rubberdiddies wrote: »

well that's one way to completely kill off the building trade in this country, which is already on it's knees. Struggling small builders who rely on attic conversions, extension etc will be the hardest hit by this. Clownism as it's finest!

Straight back to landlordism in the 1800s. Improve your land or buildings at your own expense and he raises the rent

yosemite_sam

Yep, chump politicians making an absolute pigs ear out of a country. All I can say is I am shocked at how soft Irish people have become, when Thatcher tried to impose the poll tax it finished her as a Prime minister and we are lapping this up.

rubberdiddies

it's not entirely surprising no, but it brings to the fore now the issue of whether people will be bothered getting an extension now or a conversion etc.

the knock on effect of that is less work for tradesmen, suppliers etc.

I'm concerned that this really hasnt been thought through properly

tim9002

There are property taxes in most European countries linked to value. Do you think people don't do home improvements and extensions in those countries? Time for Ireland to grow up!

barrackali

tim9002 wrote: »

There are property taxes in most European countries linked to value. Do you think people don't do home improvements and extensions in those countries? Time for Ireland to grow up!

Totally agree with you, the Irish people need to kop on!

yosemite_sam

I'm sorry but in other countries the occupier pays which is a fairer system, why should the bum living at the states expense escape paying for the house they are provided with

xper

AlmightyCushion wrote: »

Is anyone surprised by this? The tax is based on the value of the house, if something happens that increases the value of the house, it only make sense that it may affect the amount of tax you have to pay.

Exactly, the minister has just stated the bleedin' obvious. Breaking news my arse.

rubberdiddies

xper wrote: »

Exactly, the minister has just stated the bleedin' obvious. Breaking news my arse.

As obvious as it may be it doesn't take away from the fact that by stating this position it will potentially stop people who were otherwise thinking about extending, from doing so now.

The bigger picture here is the impact this will have on trades.

barrackali

rubberdiddies wrote: »

As obvious as it may be it doesn't take away from the fact that by stating this position it will potentially stop people who were otherwise thinking about extending, from doing so now.

The bigger picture here is the impact this will have on trades.

I don't get why some of the other posters can't accept the obvious here, if you have a bigger/better house than your neighbour... you should pay a higher rate of property tax. I see your point regarding the trades, but such is our economic situation as a nation...what can u do.

Duiske

yosemite_sam wrote: »

I'm sorry but in other countries the occupier pays which is a fairer system, why should the bum living at the states expense escape paying for the house they are provided with

Leaving aside the appalling insinuation that people who live in local authority housing are "bums", these people actually pay rent to the local authority at a rate of 20% of their income. As local authorities will also be liable for the property tax, this will be passed on to LA tenants and the figures being mentioned are between €150 and €180 per year to be collected via an icrease in weekly rents. So, nobody is escaping anything.

hognef

rubberdiddies wrote: »

well that's one way to completely kill off the building trade in this country, which is already on it's knees. Struggling small builders who rely on attic conversions, extension etc will be the hardest hit by this. Clownism as it's finest!

I refuse to accept a better paid job, because it'll mean having to pay more income tax...

rubberdiddies

hognef wrote: »

I refuse to accept a better paid job, because it'll mean having to pay more income tax...

Completely different and surely you can see that?
If course people will accept higher paying jobs as they will obviously end up with more money in their pocket despite higher tax.

A house extension however, in most cases is a luxury. Builders have been relying on extensions to provide work.

There will be some people now who won't get an extension due to higher property tax.
The proof will be in the figures. Im just giving my opinion. We will have a better idea by the end of the year.

Not strictly an accommodation and property statement here but there should be measures taken to grow the economy, not simply take money from people's pockets to stifle spending

seamus

rubberdiddies wrote: »

As obvious as it may be it doesn't take away from the fact that by stating this position it will potentially stop people who were otherwise thinking about extending, from doing so now.

I doubt it.

If you think about it logically, there are two types of people who extend houses:

1. Those who do it because they can afford to
2. Those who do it because they need to

In both cases, increased property taxes will not put them off. The former can afford the increased tax, the latter doesn't have a choice.

monkeypants

seamus wrote: »

If you think about it logically...

I agree with you, but I think the above is the weak point of the argument. Although the tax liability on a €75k extension is €135, there are some people who will baulk at paying it. We've seen the inverse of that in recent years with people buying newer cars based on the tax rate.

I'd still like to know how extending my kitchen means that I should pay more to the local authority. I'm not using anymore of their resources or services.

Ray Palmer

While it maybe obvious that an extension increaseses the value of the property it doesn't mean the council provide additional services. Given that why should there be additional charges for service? The charge is meant to pay for the services.
Foregeting extensions and focusing on home improvements you get a bigger mess. Insulate, solar panels, triple glazing etc. .. All can increase the value of your property but reduce the carbon footprint and save the government money. Paying vat on all of this and then to get an annual tax charge on top. It doesn't make sense and is punative.
Then you have heavily populated areas where cost of providing services is cheaper due to density yet the charge is higher.
It is extremely unbalanced, punative and short sighted application of a system.
There should at least be a credit given to energy efficiency. Great way to encourage building trade and improve housing stock.

Bicycle

Bear in mind that those who have done an extension in recent years - and I am one of those - have paid a significant service charge for the privilege. I can't remember how much we paid but it was certainly over €5,000.

And there was no change in my services. I didn't have water switched on or off, I didn't need any extra piping or sewerage, didn't need any change to the pathway outside my house. And planning charges were paid separately.

A question - I have increased the size of my house but diminished the size of my garden. My garden is now, in fact, a couple of patios with a large flower bed on one side and a small flower bed on the other. How can you say that this will increase the value of my house if the only people interested are people who want a garden?

Also, we were always told by estate agents that the cost of an extension far exceeds the market value of an extension. That for every €15,000 or so you put into an extension you will be lucky to get €10,000 back.

And if you go this route, do you look at houses that are kept immaculately versus houses that are kept badly?

I don't have any answers. Just pointing out the range of variables and reasons why some people might feel aggrieved.

Actually everyone is probably feeling aggrieved, come to think of it

hognef

rubberdiddies wrote: »

Completely different and surely you can see that?

Nope, can't see that at all. In both cases, the value that the tax is calculated from has increased, hence the tax will also increase.

A house extension however, in most cases is a luxury.

Just like buying a bigger house is a luxury (well, more of a luxury than a smaller house, at least). That's why the tax is higher on a bigger house (assuming other factors are equal).

hognef

Ray Palmer wrote: »

While it maybe obvious that an extension increaseses the value of the property it doesn't mean the council provide additional services. Given that why should there be additional charges for service? The charge is meant to pay for the services.

That same question applies to two houses of different sizes - one pays more property tax than the other. Not because of any additional services. Only because of the difference in value.

Is it your opinion that an extended house should attract the same tax as before the extension? If so, all houses should attract the same tax, regardless of size.[/QUOTE]

There should at least be a credit given to energy efficiency. Great way to encourage building trade and improve housing stock.

I do agree with that, but then that's an entirely different discussion. Also, aren't there already grants available for insulation, etc.?

EricPraline

hognef wrote: »

Just like buying a bigger house is a luxury (well, more of a luxury than a smaller house, at least). That's why the tax is higher on a bigger house (assuming other factors are equal).

Technically, the size of the house will have a relatively small impact on the taxation level, when compared to location. As it stands, those living in a 800sqft terraced house in an average part of Dublin are likely to pay a higher level of property tax than someone living in an over-extended McMansion in Donegal.

runawaybishop

tim9002 wrote: »

There are property taxes in most European countries linked to value. Do you think people don't do home improvements and extensions in those countries? Time for Ireland to grow up!

And in Ireland we have taxes that they do not with different rates. The European tax system isn't like for like.

hognef

Bicycle wrote: »

A question - I have increased the size of my house but diminished the size of my garden. My garden is now, in fact, a couple of patios with a large flower bed on one side and a small flower bed on the other. How can you say that this will increase the value of my house if the only people interested are people who want a garden?

Those people won't be interested in your house. People who want a bigger house at the expense of a garden will be. A house normally has a higher value than empty land (unless there's something seriously wrong with it), so I doubt that will be an issue.

Also, we were always told by estate agents that the cost of an extension far exceeds the market value of an extension. That for every €15,000 or so you put into an extension you will be lucky to get €10,000 back.

Then your extra tax liability will be based on the €10,000, rather than the €15,000.

In the extreme case, I guess, if your extension is bad enough, it might actually decrease the value of the property. Maybe that might be a solution if you want a bigger house, but lower property tax...;)

And if you go this route, do you look at houses that are kept immaculately versus houses that are kept badly?

Rest assured, the upkeep of the house will be a factor. So again, to reduce your tax liability, you might try to allow the garden to grow into an uncontrollable jungle, remove some roof tiles to allow water in, and knock some holes in the walls.

djimi

Essentially what you are saying is that you have a problem with the tax being attached to the value of the property. This being the case, what fairer system do you propose they use to calculate the tax to be paid?

hognef

EricPraline wrote: »

Technically, the size of the house will have a relatively small impact on the taxation level, when compared to location. As it stands, those living in a 800sqft terraced house in an average part of Dublin are likely to pay a higher level of property tax than someone living in an over-extended McMansion in Donegal.

And that's something worth a separate discussion (and I'm sure it's already been had somewhere on Boards). Does that make sense? Is it fair? Is it "correct"? If the property tax is ultimately meant to fund the local authorities, then the tax take in Donegal is unlikely to be sufficient to fund the needs in Donegal, while Dublin will take in much more tax than it actually needs.

Ultimately, Dublin will be subsidising Donegal. Is that fair?

who_me

tim9002 wrote: »

There are property taxes in most European countries linked to value. Do you think people don't do home improvements and extensions in those countries? Time for Ireland to grow up!

Cross-border comparisons are worthless unless we have full tax harmonisation. How would Germany feel if their VAT rate was increased to 23%? Or if every country had the Irish VRT rate?

People have every right to complain.

Luca Brasi

barrackali wrote: »

I don't get why some of the other posters can't accept the obvious here, if you have a bigger/better house than your neighbour... you should pay a higher rate of property tax. I see your point regarding the trades, but such is our economic situation as a nation...what can u do.

You have a bigger and better house than your neighbour because instead of spending money on drink, fags and Torremolinos you put it in to your home and then are penalised. Dont compare with other countries unless the benefits you receive from the local authority is the same. In the UK property tax supports the provision of leisure centres etc. In Ireland they close the leisure centres on Bank Holidays and Sundays just in case anyone would want to use them. The householder in Dublin will, as usual, be subsidising the owners of big houses in the country. ( houses that should never have got planning permission in the first palce)

Mrs OBumble

yosemite_sam wrote: »

I'm sorry but in other countries the occupier pays which is a fairer system, why should the bum living at the states expense escape paying for the house they are provided with

Maybe in some places, but certainly not all - except in so far as it's part of what rental income covers.

MMAGirl

30,000 in the bank to go towards extension.
Supposed to be Darwin down the other 20,000 in two weeks for the builder to start.
Husband doesn't want an extension. I do.

So now after this news Im agreeing with the husband. Going to tell the bank and the builder we aren't going ahead because we aren't spending 50k in order to spend even more in taxes every year from now on.

Brother has a house in florida that he doesn't use since he got sick. Wel'll just go there a couple of times a year with the 30k we have saved and live it up. Builder will have to find other work and the bank will have to prey on someone else that needs a loan.

hognef

MMAGirl wrote: »

30,000 in the bank to go towards extension.
Supposed to be Darwin down the other 20,000 in two weeks for the builder to start.
Husband doesn't want an extension. I do.

So now after this news Im agreeing with the husband. Going to tell the bank and the builder we aren't going ahead because we aren't spending 50k in order to spend even more in taxes every year from now on.

Brother has a house in florida that he doesn't use since he got sick. Wel'll just go there a couple of times a year with the 30k we have saved and live it up. Builder will have to find other work and the bank will have to prey on someone else that needs a loan.

Say the €50k extension were to increase your tax by €100 per year, and that you'll be living in the house for another 50 years. That's a total of €5k extra tax. Just spend €45k on the extension instead. It'll still give you a permanently better house, rather than a week or two in the sun for the next few of years.

tim9002

who_me wrote: »

Cross-border comparisons are worthless unless we have full tax harmonisation. How would Germany feel if their VAT rate was increased to 23%? Or if every country had the Irish VRT rate?

People have every right to complain.

It's the principal. Do you think that they don't upgrade their houses in countries where property taxes are linked to value? Of course they do.

And Germany has increased their standard VAT rate from 16% to 19% in recent years so as percentage increase, it is greater than the increase we have had.

MMAGirl

hognef wrote: »

Say the €50k extension were to increase your tax by €100 per year, and that you'll be living in the house for another 50 years. That's a total of €5k extra tax. Just spend €45k on the extension instead. It'll still give you a permanently better house, rather than a week or two in the sun for the next few of years.

Getting used to the idea of living it up in the sun with the money now. Extension can go jump. We don't need it that badly anyway if I'm honest. This thought was just the convincer. We want costs to come down not go up. And property taxes are going just one way.

runawaybishop

tim9002 wrote: »

It's the principal. Do you think that they don't upgrade their houses in countries where property taxes are linked to value? Of course they do.

And Germany has increased their standard VAT rate from 16% to 19% in recent years so as percentage increase, it is greater than the increase we have had.

The public feel they can't afford to pay more tax, where is the money to upgrade coming from?

tim9002

runawaybishop wrote: »

And in Ireland we have taxes that they do not with different rates. The European tax system isn't like for like.

You are correct, taxation across Europe varies greatly and in most other European countries property taxes/local council charges are much more.

djimi

MMAGirl wrote: »

30,000 in the bank to go towards extension.
Supposed to be Darwin down the other 20,000 in two weeks for the builder to start.
Husband doesn't want an extension. I do.

So now after this news Im agreeing with the husband. Going to tell the bank and the builder we aren't going ahead because we aren't spending 50k in order to spend even more in taxes every year from now on.

Brother has a house in florida that he doesn't use since he got sick. Wel'll just go there a couple of times a year with the 30k we have saved and live it up. Builder will have to find other work and the bank will have to prey on someone else that needs a loan.

Have you sat down and worked out how much extra the extension is going to cost you in tax? Seems a bit daft to deprive yourself of an improvement to your home for the sake of what might turn out to be a small increase to an annual bill.

runawaybishop

tim9002 wrote: »

You are correct, taxation across Europe varies greatly and in most other European countries property taxes/local council charges are much more.

As are the services provided.

EricPraline

barrackali wrote: »

I don't get why some of the other posters can't accept the obvious here, if you have a bigger/better house than your neighbour... you should pay a higher rate of property tax.

My main issue here is that valuation for the property tax is already very murky, and this remark about extensions is complicating the matter further.

How do you measure a "bigger/better house"? Square footage of the house? Size of the site? Energy rating? Build quality? Architectural aesthetics?

The same applies to an extension. Do you penalise a larger, more energy-efficient kitchen extension more than a poorly-built small extension? Should usage count (e.g bedrooms to increase occupancy V recreation space)? If it reduces your garden or parking area considerably, does that mitigate the increased valuation?

Frankly I don't trust the government to accurately value properties, especially when it is in their interest to over-value property to increase revenue.

Ireland: Where we take good ideas from elsewhere an implement them badly.

Victor

Ray Palmer wrote: »

There should at least be a credit given to energy efficiency.

This is a tax that is there primarily to raise money, not change behaviour. If they wanted to change behaviour, they would apply the full whack of excise to heating fuels.

You do realise that energy efficiency grants are available?

tim9002

runawaybishop wrote: »

As are the services provided.

True. But the whole problem here is that during the great Bertie giveaway years most people on average incomes paid little or no direct taxes. (excluding VAT, VRT etc). Instead of providing services to people, Bertie gave them cash!

For example take a couple earning 50k with a mortgage and a couple of kids. By the time you factored in mortgage interest relief, children's allowance, early childhood supplement, that couple were probably net receipients from the state and I haven't even mentioned SSIAs. You can't run a country like that and so it has proved to be.

Bertie was relying on transactional taxes from a credit binge and a property ponzi scheme and when it came to a head it ended in tears.

runawaybishop

tim9002 wrote: »

True. But the whole problem here is that during the great Bertie giveaway years most people on average incomes paid little or no direct taxes. (excluding VAT, VRT etc). Instead of providing services to people, Bertie gave them cash!

For example take a couple earning 50k with a mortgage and a couple of kids. By the time you factored in mortgage interest relief, children's allowance, early childhood supplement, that couple were probably net receipients from the state and I haven't even mentioned SSIAs. You can't run a country like that and so it has proved to be.

Bertie was relying on transactional taxes from a credit binge and a property ponzi scheme and when it came to a head it ended in tears.

I don't disagree - issue is that for many people their house is costing them a fortune now so to go from no tax to lots of tax is extremely difficult, if not impossible, for a large set of society.

tim9002

runawaybishop wrote: »

I don't disagree - issue is that for many people their house is costing them a fortune now so to go from no tax to lots of tax is extremely difficult, if not impossible, for a large set of society.

Yes it is difficult. The property tax system should have been reformed years ago as high stamp duty rates are very unfair, an annual system is much fairer. The method of calculation can be argued about.

It should have been reformed about 13/14 years ago when Fianna Fail started lowering income taxes which was the right thing to do as they were too high at the time. If they had introduced an annual property tax system then in exchange for the lowering of income taxes we wouldn't be in as much trouble as we are now.

P. Breathnach

Ray Palmer wrote: »

... There should at least be a credit given to energy efficiency...

I don't need a tax incentive for that. I'm incentivised by reductions in my energy bills.

Bicycle

I have no problem with a property tax.

BUT what I do have a problem with is the way in which houses will be valued.

For example in the last month I had to get a property valued for a family member. We were told by the valuer that there are different approaches to the valuation of houses depending on the reason for the valuation.

For example, if it is a house for sale, they will go above the average expected in order to try to maximise the gain for the seller.

If on the other hand it is a probate valuation, they will go below the average expected so that there is a certain amount of leeway. If the house is valued high and sells low then the beneficiaries will be paying tax unnecessarily. At least if they value low and the house sells high, the situation can be balanced by paying Capital Gains on the difference because Revenue will most certainly not refund any overpayment to the estate.

And at the end of the day, the true market value of a house is what a seller on a given day is prepared to pay for it in consultation with their bank.

A house near me sold a couple of years ago for a crazily inflated price purely because the buyer was cash rich and wanted to be near a family member. It doesn't follow on that the rest of the houses in the area, extensions or no extensions are worth even remotely near that amount.

davet82

Ray Palmer wrote: »

While it maybe obvious that an extension increaseses the value of the property it doesn't mean the council provide additional services. Given that why should there be additional charges for service? The charge is meant to pay for the services.

you actually bought that line? :pac:

i agree with you but lets face it, this about paying bondholders/banks/debt nothing to do with services no matter how much people want to dress it up.

.......................................................................................................

if you live in an estate of 3 bedroom houses and you build a 5 bedroom house with a swimming pool on a corner in that estate with a bit of extra land then you should pay the extra tax because your house is worth more, its only fair?

EricPraline

Bicycle wrote: »

For example in the last month I had to get a property valued for a family member. We were told by the valuer that there are different approaches to the valuation of houses depending on the reason for the valuation.

I have encountered the same, and valuations can fluctuate considerably, depending on the valuer in question, and the motivation of the person/company paying them.

Again, it is hard to believe that the third parties who will provide valuations for the government will not be influenced by the desire to raise revenue.

rubberdiddies

djimi wrote: »

Essentially what you are saying is that you have a problem with the tax being attached to the value of the property. This being the case, what fairer system do you propose they use to calculate the tax to be paid?

i personally feel that the property tax should be just that a tax on property, not on value.

tax bands should be uniform across the country based on property square foot, not on location.

so a person with a 3 bed semi 1300sq ft in Dublin should pay exactly the same as a person with a 3 bed semi 1300sq ft in leitrim. dont see why there should be a difference.

tim9002

rubberdiddies wrote: »

i personally feel that the property tax should be just that a tax on property, not on value.

tax bands should be uniform across the country based on property square foot, not on location.

so a person with a 3 bed semi 1300sq ft in Dublin should pay exactly the same as a person with a 3 bed semi 1300sq ft in leitrim. dont see why there should be a difference.

I think size should have been a factor but that value should be one also. It might have made people think twice about some of the 4000ft plus muck mansions you see littering the Irish countryside.

ledgebag1

what if you bought a house with an extension? or a garage conversion.

That's a bit ridiculous. considering a lot of people are also in negative equity on purchases.

Not to go off topic, but the value of a house and the rebuild value are completely different. Which is a nonsense and now the property tax is essentially going to be charge at another value

Demented

L1011

The tax is and always was going to be on value. Wittering about extensions is a distraction. You buy a dearer house, you pay more tax.

ledgebag1

MYOB wrote: »

The tax is and always was going to be on value. Wittering about extensions is a distraction. You buy a dearer house, you pay more tax.

right so

jmayo

yosemite_sam wrote: »

I'm sorry but in other countries the occupier pays which is a fairer system, why should the bum living at the states expense escape paying for the house they are provided with

That is not always the case and AFAIK in the Netherlands, the resident pays a portion and the owner pays a portion.

yosemite_sam wrote: »

Yep, chump politicians making an absolute pigs ear out of a country. All I can say is I am shocked at how soft Irish people have become, when Thatcher tried to impose the poll tax it finished her as a Prime minister and we are lapping this up.

AFAIK the Poll tax was just a tax on people, this is a tax on what a person owns and is not a flat rate.

djimi wrote: »

Essentially what you are saying is that you have a problem with the tax being attached to the value of the property. This being the case, what fairer system do you propose they use to calculate the tax to be paid?

The system where someone else pays it I would bet.

MMAGirl wrote: »

30,000 in the bank to go towards extension.
Supposed to be Darwin down the other 20,000 in two weeks for the builder to start.
Husband doesn't want an extension. I do.

So now after this news Im agreeing with the husband. Going to tell the bank and the builder we aren't going ahead because we aren't spending 50k in order to spend even more in taxes every year from now on.

Brother has a house in florida that he doesn't use since he got sick. Wel'll just go there a couple of times a year with the 30k we have saved and live it up. Builder will have to find other work and the bank will have to prey on someone else that needs a loan.

Ask the brother how much are his proeprty taxes in Florida while you are at it.
Maybe you can help him pay his taxes over there.