Click here for your TAX RETURN QUOTE

What types of rental income are there?

 

  • The most common type of rental income is from letting a house, flat, apartment, office, building and from bare land.
  • Income from an easement, i.e., if payment is received for the right to erect advertising signs, communication transmitters, or the grant of a right of way or a way-leave.
  • Income arising from a conacre letting.
  • Service charges in respect of services ancillary to the occupation of property.
  • Premiums and other similar sums received on the grant of certain leases,normally on non-residential property.

What expenses can be claimed?
Broadly speaking, in calculating your rental expenses you can deduct expenses so long as they are incurred wholly and exclusively for business purposes, and are not of a capital nature. See Allowable Expenses for the detailed list.

What is the position with regard to interest paid on borrowings?
Certain restrictions were introduced on the deductibility of interest on borrowed money used in the construction, purchase, or repair of rented residential premises in the State or foreign residential premises.

 

What expenses can be claimed for Wear and Tear?
If a premises is let for residential purposes and it is furnished, a claim can be made for a wear and tear allowance (or capital allowances) based on the cost of the furniture and fittings.

It will be necessary to retain an itemised list of expenditure incurred each year.

What expenses cannot be claimed for?

  • Pre-letting expenses, 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 expenses 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
  • Expenses incurred between lettings Expenses incurred in the period between lettings are deductible provided the landlord was not in occupation of the premises during the period and a new lease is granted.

What If I Rent a Room in my own home?
Where an individual rents a room (or rooms) in a “qualifying residence” and the gross rent received, including sums arising for food, laundry or similar goods and services and the income does not exceed €10,000 this income will be exempt from income tax by including it in the individuals tax return.

This scheme will not affect the person’s entitlement to mortgage interest relief or the capital gains tax exemption on the disposal of a principal private residence.

There is no deduction for expenses made in ascertaining the rental income received and if the income does not exceed the limit in the year then those profits/losses are treated as “nil” for the year of assessment.

This income is not liable to either PRSI or the 2% Health Levy but it must be included on an individuals annual income tax return.

How is taxable rental income calculated?

The taxable rental income is calculated by reference to the total rent receipts less allowable expenses less capital allowances.

What if a loss is made?
A loss will arise if total allowable expenses are more than the rents received. This loss can be set against any other profit rent made by the landlord or carried forward against future rental profits. Such losses cannot be carried back or used to shelter non-rental income.

Do I have to keep records/receipts?

You must keep full and accurate records of your lettings from the start.

All supporting records such as invoices, bank and building society statements, cheque stubs, receipts etc., should also be retained. You must keep your records for six years as per Revenue.

What if Rents are payable to a non-resident landlord?
If a landlord resides outside the country and rent is paid directly to him/her or to his/her bank account either in the State or abroad, tax must be deducted by the tenant at the standard rate of tax (currently 20%) from the gross rents payable. Failure to deduct tax leaves the tenant liable for the tax that should have been deducted.

How are foreign rents taxed?
In general, income from foreign property is computed on the full amount of the income arising, irrespective of whether the income has or will be received in the State.  The same deductions and allowances are available as if the income had been received in the State.

Deductions are also normally available in respect of such income for sums in respect of foreign tax paid. This income should be included in an individual’s tax return on the Foreign Income panel.

Is there a rent relief tax credit for tenants?
Tax relief may be claimed by a tenant paying rent to a landlord for private accommodation. See our sister website for further information.

Are there implications when you sell your rental property?
This is where a property that has been let is disposed of, Capital Gains Tax may arise on the disposal. This needs to be looked at on a case by case basis as this calculation can be intricate and to ensure that you can avail of all tax planning opportunities. Hence, we can provide specialist tax experience when this occurs.