Rental Property Income
Rental Property owners / landlords in receipt of rental income from residential or commercial property are obliged to submit tax returns annually, whether the rental property is profit making or not. Frank McMahon & Co is very experienced in this area and can provide tax advice for landlords, and can help landlords with their tax returns.
The most common type of rental property income is from letting a house, flat, apartment, office, building, land, a holiday home or Section 23 or other tax relief properties.
When calculating your rental property expenses, you can deduct expenses so long as they are incurred wholly and exclusively for the purpose of the rental property. Rental Property expenses can significantly reduce one’s rental profit.
Rental Property Expenses that can be claimed:
The following are examples of the type of expenses that may be claimed:
- Repairs, insurance, maintenance, service charges, advertising for tenants, tax consultant fees and management of the rental property.
- Interest accruing on money borrowed to purchase, improve or replace the rental property.
- Goods provided and services rendered in connection with the letting of the rental property, i.e.. anything that you purchase for the property can be offset against your rental income.
- Only expenses after the date of first letting are allowable, with the exception of the costs of negotiating the first letting – such as auctioneer’s, marketing, and solicitor’s cost.
- Capital allowances at a rate of 12.5% annually can be claimed on costs incurred on items that are not revenue in nature, i.e.. that have a long term value, these costs will be written off over an 8 year period.
- PRTB – this expenditure can be offset against your rental property income.
- NPPR – this is not an allowable deduction against your rental property income.
- Losses can be carried forward and offset against future rental profit or increase your rental loss in the following year.
Rental Property Expenses that cannot be claimed:
- Pre-letting, i.e., expenses incurred prior to the date on which the premises was first let apart from auctioneer’s letting fees, advertising fees and legal expenses incurred on first lettings.
- Post letting i.e., expenses incurred after the period of the last letting are not allowable.
- Capital expenditure incurred on additions, alterations or improvements to the premises unless allowable under an Incentive scheme.
- A deduction can be made only once. If a deduction has already been made in a person’s tax computation, the amount will not be allowed as a deduction in arriving at the person’s net profit/loss rent, i.e., you cannot obtain relief more than once for the same expense.
- Rental Property expenses incurred in the letting of premises on an uneconomic basis are not deductible.
Frank McMahon & Co Accountants will be happy to assist you in reviewing your rental expenses in more detail.
Types of Rental Property Income:
- Letting a house, flat, apartment, office, building, land, a holiday home or Section 23 or other tax relief properties
- Foreign Rental Property Income – Property that was acquired across the globe in which you receive rent.
- Non Resident Landlords – Landlords with Irish properties who are not resident in the state.
Rent a Room Scheme:
The Rent a Room Scheme is a great way to earn money tax free, while at the same time, contributing to your mortgage repayments or allow you to live that little bit more comfortably!
Under the Rent a Room Scheme, you can earn up to €12,000 a year for 2016 tax free from renting out one or more rooms in your house.
Annual exemption limit for Rent a Room Relief:
- 2013 €10,000
- 2014 €10,000
- 2015 €12,000
- 2016 €12,000
- 2017 €14,000
5 Important Points to remember when completing a Rental Property Tax return
Valid PRTB Registration (Tenancy Registration)
Mortgage interest payments can only be claimed as an expense on a rental property income tax return of you have a valid PRTB registration in place. You are required to periodically renew your PRTB registration even if you do not have a change in tenancy.
You are only entitled to claim 75% of your annual mortgage interest. Your mortgage provider should issue you with a mortgage interest certificate at the end of each tax year which will confirm the total amount of interest charged in the year.
Repairs & Maintenance Cost v Purchases of Furniture & Fittings
It is important to classify these expenses correctly as different tax treatments apply to each type.
Rental Property expenses which can be claimed, Repairs & Maintenance should relate to the cost of general repairs and ongoing upkeep of the property, examples below:
– Replacement parts for existing fixtures and fittings already in the rental property.
The purchase of new furniture and other fixtures and fittings cannot be claimed under Repairs & Maintenance, you must claim tax relief on these expenses via a capital allowances claim, examples below:
– Washing Machines
Capital Allowance tax relief is a particular way of claiming tax deductions on the cost of furniture and other equipment and fittings. Instead of receiving the full tax deduction of these in the year in which you purchased them, you are instead entitled to 12.5% of the costs of these each tear fir 8 years.
Management Fees, Insurance & Other Time Apportioned Expenses
Certain rental property income return expenses must be time apportioned before claiming on your tax return. If you pay management fees or insurance on your property and the period covered by these fees do not coincide with the tax year, you must time apportion the fees.
Starting or Finishing as a Rental Property during the Year
Certain rental property income tax expenses should be time apportioned where the property is let for the first or last time during the year.
Contact us TODAY – We can prepare and submit all Rental Property Accounts and Tax Returns.