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Tax Return Deadline is Approaching

Tax Return Deadline

Well, the kids are back at school and the evenings are closing in, which can only mean one thing….the tax deadline is approaching!

The deadline for lodging your 2014 Rental Income Tax Return and paying your 2014 tax liability is 31st October 2015. This means there’s just 8 weeks to get your paperwork sorted. Therefore, in order to allow us to review and prepare your Tax Return, you’ll need to have your completed application form and supporting documents into us by 18th September.

We take the hassle out of sorting through your receipts and preparing your tax return – all you have to do is provide the details on our application form and we sort out the rest.

Contact us today for your obligation free quotation.

Tax Issues for Airbnb Hosts

Tax Issues for Airbnb Hosts

With the increasing popularity of Airbnb in Ireland, many homeowners have been enjoying a little extra tax-free spending money by becoming Airbnb hosts and renting out a room or entire property to tourists or holiday makers.

Assuming the income would fall under the Rent-a-Room Relief scheme, many Airbnb hosts were not declaring this as taxable income. However, Revenue were quick to clarify the situation after seeing the potential loop hole, and unfortunately they did not view the additional income in quite the same light.

So, we thought we’d help shed a bit of light on the issue of taxes for Airbnb hosts in Ireland.

Income from Airbnb rentals is taxable

Income received from renting out a room in your house or the entire property on a short-term basis is taxable. Previously, it was assumed that renting out a room on Airbnb would qualify for the €12,000 tax free threshold under the Rent-a-Room Relief scheme. However amendments to the scheme guidelines now state that short-term lettings are not eligible if they are provided through online accommodation booking sites.

Therefore, you need to declare this additional income to Revenue for taxation purposes. Income from Airbnb rentals is deemed to be trading income and not rental income.

Claim expenses to help reduce your tax bill

It’s not all bad news however! Given that Revenue considers income from your Airbnb rentals as ‘trading income’, it is only reasonable that allowable trading expenses should qualify as deductions. These are expenses like the cost of providing meals, light, heat or laundering costs – as well as repairs and maintenance to guest accommodation areas.

Therefore, it is imperative to keep your receipts for these items so they can be offset against your income to reduce your overall tax bill.

How to declare this income

If you’re a PAYE worker, to declare your additional income to Revenue you need to complete a tax return. This is done via a Form 11 or Form 12, depending on the amount of additional income you have. Where the profit from your additional income is less than €3,174, then you need to complete a Form 12. However, if your profit is €3,174 or more, you need to complete a Self-Assessment return, via a Form 11. Your return needs to be completed by 31st October the following year.

If you are self-employed, you need to declare this as part of your trading income on your annual tax return, via a Form 11.

Thinking of selling? You could get stung for Capital Gains Tax

Unfortunately it doesn’t stop at just taxing your income. Down the line if you decide to sell your property, you could be liable to Capital Gains Tax (CGT) as the property has been used for business purposes.

Normally, the gains from the sale of a principal private residence are exempt from CGT. However, Revenue have said that if all or part of the property has been used for business purposes, including short-term rental accommodation prior to a sale, then a capital gains tax liability would arise on the portion of the property that was used for business purposes. From 2012 onwards, a CGT rate of 33% applies – ouch!

It pays to get your taxes right

Revenue have said that since 2013 it has had access to data from financial institutions related to credit and debit card transactions, which mean it can identify online traders in this area. Therefore, there is no use burying your head in the sand, as it is quite likely that Revenue will be undertaking spot checks in this area and you could be penalised if you have declared this additional income.

For more information, visit Revenue’s website.

Written by Breda Lyster

Breda LysterI’m the expert when it comes to all things Rent at Red Oak. I’ve been working with our Rental Income clients for the past 3 years, so have seen just about everything – from shoeboxes of receipts to ‘the dog ate my homework’ style excuses. It doesn’t matter what state your rental records are in, I’ll get them sorted for you.

A Simple Guide to Being a Landlord

A Guide to Being a Landlord

Many landlords are reluctant landlords these days, so it can be a little overwhelming working out what you need to do to get set up as a landlord in the first place. It’s not as easy as just handing over the keys and receiving rent back. So, here’s a simple guide to being a landlord in Ireland.

Letting Agent or Go It Alone?

One of the first decisions to make when renting a property is whether to manage the property yourself or to engage a letting agent or management company. To help you decide, there’s a few questions you should ask yourself:

  • Do you have time to respond to enquiries and show possible tenants through the property?
  • Do you have time to deal with tenant problems?
  • Do you have the time and know how to carry out maintenance on your property?

In the end, the decision will depend on your individual circumstances.

Review the market

You need to decide how much rent you will charge – which will ultimately depend on the location and quality of your property and similar properties available to rent in your area.

Be realistic! You need to factor in times when the property is empty in the financial projections, as well as all the other costs associated with having a rental property.

Get your property rental ready

There’s a few things to get sorted before you start looking for tenants. Firstly, you need to ensure that property meets certain minimum standards – this includes things like the property is free from damp, in good structural repair, has hot and cold water, adequate means of heating and ventilation, appliances are in good working order and electrical wiring, gas, pipes are in good repair. You also need to have a Building Energy Rating, or BER, Certificate.

Spread the word

There’s loads of different ways to get the word out that your property is available to rent – and they’re not expensive! One of the most popular ways is to list your property on www.daft.ie which costs approx. €20. You can also place an advertisement in your local or national newspaper or if you are near a College or University, even posting an advertisement on student noticeboards can attract potential tenants.

Know your rights

It’s important to know your rights when becoming a landlord. The Residential Tenancies Act 2004 outlines your rights as a landlord, which include:

  • Setting the rent, once a year according to the current market
  • Receiving the rent from the tenant on the date it is due
  • End the tenancy without reason within the first six months of the lease agreement. However, special care should be taken when dealing with fixed term tenancies as a reason will always have to be given
  • Be informed of who is living in the property
  • Decide whether to allow sub-letting by the tenant
  • Be informed of any repairs needed and be granted reasonable access to fix them
  • Refer disputes to the Private Residential Tenancies Board (PRTB) once the tenancy is registered

Know your obligations

Likewise, there are certain obligations you need to fulfil in order to execute your role as a landlord in accordance with the law. These include:

  • Register the tenancy agreement with the Private Residential Tenancies Board. This only costs €90 and means you will be able to avail of the PRTB’s dispute resolutions service. Plus, if you don’t, you may be prosecuted.
  • Provide your tenant with a rent book (if no written lease is in place) and receipts of payment
  • Make sure that your property is in good condition
  • Pay any charges related to the property e.g. taxes and duties
  • Maintain the property to the standard it was at the start of the tenancy
  • Reimburse the tenants for any repairs carried out on the structure
  • Insure the property
  • Provide your tenant with information and contact details of any agent who deals on your behalf.
  • Cancel your Tax Relief at Source (TRS), if you have a mortgage and were claiming this
  • Submit a Rental Income Tax Return before the 31st October of the following year

Manage your finances

As you have rental income, you will now be required to complete a tax return. Rental income is liable to income tax but you are allowed to offset certain expenses, such as

  • Mortgage Interest
  • Accountancy Fees
  • Insurance
  • Repairs

Things like opening a separate bank account for your rental income and expenses and keeping accurate records (and your receipts!) for all your rental expenses will help make your life a whole lot easier when it comes to tax time.

Don’t be afraid to ask for help!

Knowing what expenses you can and can’t claim is not an exact science and the last thing you want to do, is submit an incorrect tax return. Our team are experts in managing your rental income tax return and will offer you a personalised service, so you know the job has been done right!

Contact us today for your obligation free quotation.

Breda LysterWritten by Breda Lyster

I’m the expert when it comes to all things Rent at Red Oak. I’ve been working with our Rental Income clients for the past 3 years, so have seen just about everything – from shoeboxes of receipts to ‘the dog ate my homework’ style excuses. It doesn’t matter what state your rental records are in, I’ll get them sorted for you.

Mortgage Interest Expensed against Rental Income

Budget 2012 Mortgage InterestPossible changes to Mortgage Interest Allowed.

For most people, Mortgage Interest is the largest expense item you can claim against your rental income in Ireland.  While it used to be allowable 100% against your rental income, since 2009 you can only claim 75% of your mortgage interest in reducing your tax bill.  This change resulted in many people having a profit on a their rental properties, where previously they had a loss.

TASC Recommends further Reduction

One of the recommendation from TASC, an independent economic agency, for Budget 2012 was to further reduce the amount of Mortgage interest allowed from 75% to 40%.

Will it Happen?

Certain areas are seen as easy targets in Budgets and landlords / rental income certainly fit the bill in this.  But as it is already proposed in Budget 2012 to introduce PRSI on rental income, putting two charges on landlords in the same Budget may prove to be a touch too far.  We’re hoping this TASC proposal is kicked to touch in this Budget.

If this was introduced in the Budget, the cost to a landlord who pays tax at the higher rate would be approximately €182 per €1,000 of previously allowable mortgage interest.

Budget 2012

Keep up to date with how Budget 2012 with affect Landlords and your Irish rental income tax returns on our blog here or for non rental income changes, check out our Budget Calculator which we will update on the evening of the 6th December.

Having to rent out your home? – What do you need to do?

It seems that more and more people are having to rent out their homes and they themselves going home to live with parents or renting cheaper accommodation.

When this happens, what things should you do now that you are a landlord?

Here is a a checklist for the new landlord:

  1. House and Contents Insurance – you require a different policy now that the house is a “buy-2-let”, your own home insurance is most likely inadequate.
  2. PRTB – you need to register with this body, the cost is €90 since 1 Jan 2011.
  3. BER certificate – when renting out your home, this is a basic requirement since 2009  (normal cost approx €100).
  4. Tax clearance certificate – if you are renting your home to the local authority, they will require a tax clearance certificate before they will make payment of any rent. You can contact our offices for assistance on this matter.
  5. Inventory list – Every landlord should have an inventory for each property as it outlines not only what is in the property, but also what condition the contents are in at the time of letting. This can help to prevent disputes when tenants move out.
  6. Good lease agreement – This is essential in managing your property, avoiding disputes during the course of the tenancy. Never let a tenant into a property without a signed lease agreement.
  7. Mortgage Interest Relief – as you are renting out your sole residence, you are not entitled to claim the Mortgage Interest Relief any longer. You need to contact your local tax office/mortgage provider to notify them of this.
  8. Rent Relief for Private Rented Accommodation – if you are now a tenant and renting other accommodation, you will be entitled to this tax credit, you can contact our offices for assistance on this matter.
  9. Be a Clever Landlord – set up a separate bank account, keep all receipts for costs you incur for your property, screen tenants, maintain your property and react to necessary repairs quickly.
  10. Letting agent/ Management agent – If you are shackled for time and by distance from your property, then these services may be your very solution. They can take the stress and strain away that landlords sometimes come across.

Tax reliefs on your property – Are you losing or using them?

The incentives to invest in property (normally called a “Section 23” property) and receive generous tax reliefs is something that most investors were aware. These opportunities have at this point have ceased, but the reliefs that landlords had may still exist.

In some recent cases, we have seen situations where a married couple jointly own such a Section 23 property along with other investment properties. The reliefs available were split 50:50 between the couple.

The wife had a separate investment property which fully used up her share of the available reliefs at a much faster rate. This resulted in a tax bill arising on her rental income, even though her husband had substantial reliefs available.

Is there a solution to this problem?

The solution (once both husband and wife agree on it) would be to get the legal title of the property changed from the wife to the husband, which would mean the rental income would be legally in his name. If this change occurred in 2011, for example, his tax reliefs would be available against his rental income in 2011, which would include his “new” property.

Landlords – Are you compliant…please read on

A report from the Private Residential Tenancies Board (PRTB) illustrates the increase of incidences of tax evasion and growth in the black economy point, which is estimated to be €4.5 billion (as per ISME).

In 2004, the residential tenancies legislation made it obligatory to register rental properties with the PRTB. Seven years later, however, the law is being widely ignored and only half of those landlords who receive State rent allowance payments are registered with the board.

The Minister of State for Housing Willie Penrose making payments directly to landlords (rather than to their tenants). Because State payments amounting to €500 million are made indirectly to landlords, along with poor official record keeping, the PRTB has great difficulty in identifying non-compliant landlords.

It will now share the information it has gathered with the Revenue Commissioners and with local authorities.

For decades, large chunks of poor-quality rented accommodation have been an effective “no go area” for the tax authorities.This should now change.

The Irish Times – The black economy

Irish person with foreign property

“I have a property in Lanzarote, which I rent out privately. I am not sure what I am supposed to do as regards my taxes. What can I claim? I’ve paid a lot of expenses – can these be claimed?”

This was recently asked and reflects a more recent situation in Ireland. In the last 10-15 years, a greater number of Irish purchased foreign properties as holiday homes and long term investments.

As you receive rent from the foreign property (whether cash or lodged into foreign bank account), you are subject to Irish tax on this income. You may also be taxable in the country where the property is located also, and one should seek local tax advice in that country regarding their tax obligations.

The NPPR charge is not subject to foreign properties.

You can claim expenses (same as landlord in Ireland) and you are required to keep these receipts for a period of 6 years. E.g. Plumbing, letting agent fees, management fees, some travel costs (solely relating to the property, not as holiday), interest paid on property’s mortgage.

The “rule of thumb” is that if the expense is incurred for purpose of renting out the property or managing the property, then these costs are allowable.

 

Foreign holiday home – sunshine, sand & taxes!!

Basking in the warm sunshine at your tropical paradise, the last thing you will be thinking about is taxes.

If you are renting out this little piece of heaven, you should be aware that over this side of the water, the Revenue Commissioners are waiting to get their piece of your paradise.

Basically, if you are receiving rent from a foreign property, you are subject to Irish taxes and required to make an annual tax return. Actually, if you open a foreign bank account, you are obliged to inform the Revenue Commissioners.

So enjoy your paradise and when you return, call our offices so we can ensure your outlook remains calm blue skies when dealing with the Revenue Commissioners.

Landlord’s Taxes – What do I have to pay?

On a yearly basis there are a number of taxes/levies that you as a landlord are subject to, here are a selection of them:

Income Tax
Assuming that you (and/or your spouse) have other income, either being in employment or self employed, you will be subject to tax on your net rental income. The rates of tax are 20% and 41%, dependent on your income as to which rate will apply to you.

If there is tax payable, then the deadline to pay is on the 31st October. E.g. if you are paying tax for 2010, the deadline to pay is on the 31st October 2011.

Levies – (Income Levy, PRSI & Health Contributions)

The net rental income is subject to all the levies, which have different rates depending on your total income (rates – Levies). These amounts are paid when paying Income tax on the 31st October.

In 2011, the Universal Social Charge replaced the Income Levy and Health Contributions.

Preliminary Tax

This is paying your tax in advance. e.g. you pay preliminary tax for 2011 on the same day as you pay tax for 2010, the deadline for which is the 31st October 2011. The amount depends on how much your tax liability for 2010.

PRTB

This is a requirement when letting to tenants. The current fee is €75 which can be paid on the PRTB website. This is a tax deductible cost for the landlord.

NPPR

In 2010, the NPPR charge was introduced. This applies to property which is not your home (principal private residence). The current charge is €200 which can be paid on the NPPR website.