Click here for your FREE ASSESSMENT

Claiming the Cost of Renovations

Home Renovation Incentive for Landlords

Have you been wanting to give your rental property a bit of a makeover, upgrade the bathroom or even a little landscaping?

Many landlords haven’t invested in renovations in their investment properties in recent years – mainly due to an inability to recoup the costs through rental income. We know it’s difficult enough to make a profit as an Irish landlord, but there is a scheme available to help reduce the cost of your improvement works.

What is the Home Renovation Incentive Scheme?

In October 2013, the Government launched the Home Renovation Incentive (HRI) Scheme for homeowners and later extended the Scheme to landlords in October 2014 in a bid to boost the building trade. The HRI gives tax relief on the VAT portion (13.5%) of a bill for repair, renovation or improvement works carried out by an authorised contractor. At this stage, the Scheme will run until 31st December 2015.

How It Works

The HRI Scheme provides tax relief by way of a tax credit to homeowners and landlords who undertake to repair, improve or renovate home or rental properties. The credit is 13.5% of your qualifying expenditure. Qualifying expenditure is the amount you pay a contractor before VAT so you are effectively getting relief on the VAT paid by you to the contractor.

Qualifying Expenditure includes activities like:

  • Painting and decorating,
  • Tiling, plastering,
  • Plumbing,
  • Window replacement,
  • Bathroom upgrades,
  • Supply and fitting of kitchens,
  • Attic conversions,
  • Garages,
  • Rewiring, extensions,
  • Landscaping,
  • Driveways,
  • Septic tank repair or replacement.

Of course, this list is not exhaustive, so if you are unsure you can contact your local tax office before works commence and they will advise you if the project is eligible or not.

How Much Can I Claim?

The maximum tax credit available is €4,050 (€30,000 at 13.5%). The relief is claimed back over 2 years following the year in which the work was carried out. So for example, for work carried out in 2015, you will receive the HRI tax credit during 2016 and 2017.

It is important to note that you won’t get a refund from Revenue but it will increase your tax credits. So, as with other tax credits, you must have earned enough and paid tax in order to benefit. If you haven’t paid enough tax to cover the amount of the relief you can carry the credit forward to future years when you may be able to utilise it. Finally, the tax credit applies only to income tax paid, not to USC or PRSI.

The Small Print

There are a few conditions that you need to be aware of when looking to apply for the Scheme.

  • Minimum Spend: There is a minimum spend of €4,405 before VAT in one year (€5,000 including VAT). However, you don’t have to spend the total €5,000 with the same contractor. Over the course of a year you can use a different tradesmen. As long as each is a qualifying contractor and you spend a total of €5,000 within the year, this qualifies for tax relief.
  • Tax Compliance is vital: you and your contractor need to be tax compliant. That means a Tax Clearance certificate for your contractor and up-to-date tax returns, Local Property Tax, Household Charge and PRTB payments for you
  • Exclusions: You cannot claim this credit on new builds or complete reconstruction of an uninhabitable house.
  • Insurance Claims: If you are making an insurance claim please note that the qualifying expenditure is reduced by the amount of your claim received.
  • Grants: Where grants are received, your qualifying expenditure is reduced by three times the amount of the grant.
  • Apply Online: You must use the HRI online system to apply for the Scheme or you won’t be eligible. See details below

How to Apply

To apply, you need the cooperation of your contractor/s – but it basically involves 4 steps

Step 1 – Get a Quote/Invoice with the Contractors’ VAT number

Step 2 – Request your contractor/s to enter the works on the HRI Online System and check that they are entered before the works commence (or at least before you make the first payment).

Step 3 – Make sure our contractor/s enter each payment made. It’s not good enough just to keep copies of the receipts.

Step 4 – Once the works are complete and all payments have been entered by the contractor/s, you need to log into the HRI Online system to claim the tax credits. This means you will have to submit your claim via the HRI Online System after 1st January in the year following the works for the tax credits to be applied by Revenue.

 

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.

Choosing a Tradesman for Repairs: Tips for Landlords

Repairs & Maintenance

While Repairs & Maintenance of your property is tax deductible against your rental income as a landlord, the cost of poor workmanship can be great. Here’s some advice on how to choose a tradesman from the experts at tradesmen.ie.

Tax deductible repairs – Landlord tips

When you have a project and you are spending time and money on getting it right its important to make sure the tradesmen you select is the right person for the job.
If you don’t it can end up costing a lot more than you bargained for and be a lot more hassle than it should be.
So how will you know who’s the right tradesman? Well follow our tips and you will have a successful project completed in no time!

Choosing a Tradesmen

First things first you will want to schedule a meeting with the tradesman. He should come and view your project and you both can discuss what’s best for the project and the budget. If the tradesman is late or cancels the appointment then this is a sure indicator of how the tradesman will continue the project so be wary of this!

When he does come ask him to bring with him a portfolio of work or ask if he has a website so you can view his past works and get an appreciation of his work quality and style. Ask him for referees for work he has done similar to your project so you can gauge his work and professionalism, also ask him for evidence of qualifications. This can be a registration with a professional body or you can ask for evidence of insurance.

Don’t be afraid to ask for these things as its important to know who it is that you are trusting and who will be working in your home. A good quality professional tradesman would bring these items with him to quotations without the clients having to ask for them anyway as he would know these items are important to customers.

Making Payment

If you decide to contract a tradesman remember to draw up a contract with what has been agreed as items can be forgotten about later, also don’t pay the full amount up front. It’s best to pay in stage payments for larger projects and perhaps 50% upfront on smaller projects with the remaining balance when work is complete.
The contract should also state the break down of fees and how much is for labour and how much for materials. Also ask for copies of receipts if the tradesman is purchasing the materials on your behalf. Check the work as it’s been done to make sure you are happy with it or get an expert to sign off on each stage of larger jobs.

This may seem like a lot of work but a bad tradesman can cost you so much in time and money that its best to take your time deciding which tradesman to use and following the tips above so that you have a finished project that you are happy with.

This article was kindly written by Cheryl Chambers of Tradesmen.ie. Tradesmen.ie is the premier website in Ireland that helps you get a number of quotes from rated tradesmen. So the next time you’re looking for a tradesman remember to post your job on www.tradesmen.ie!:)

More taxes for Landlords?

New raid on holiday homes in tax charge

HOLIDAY home owners will not escape the new household charge, even though they are already paying a tax on their second property.

Environment Minister Phil Hogan has revealed the new flat-rate household charge will be totally separate from the existing second-home levy.

This means that along with the existing NPPR charge of €200,  owners will be obliged to pay the expected €100 household levy, introduced next year.

It will leave the owners of the country’s more than 300,000 holiday homes facing a tax bill of at least €300 a year.

Fine Gael and Labour have committed to introducing it as part of the EU-IMF bailout. Landlords will have to pay for each unit they let. It could lead to rents being pushed up across the country.

Herald.ie – New raid on holiday homes

Furbishing your rental property – Any benefits to this?

As with all things in life….nothing lasts forever. So, unfortunately for landlords, they will have to replace items or refurbish their property.

Is there any benefit besides having an improved rental property?

Simply, Yes.

The costs you will incur come under this simple Rule of thumb – if it’s incurred wholly and exclusively for the purpose of earning the rent, then it’s a tax deductible cost.

These allowable items (e.g. install new boiler, refurbish bathroom, etc.) are taken as a deduction over 8 years against the net rental income.

If you have taken a loan out to carry out the refurbishment, then the interest on this loan is also tax deductible.

If the costs are repairs more so than refurbishments, then these are allowable in the year that they occur.

 

Future Charges for Landlords

The future….is now!!

As you are aware, between the IMF and the government, certain taxes will have to be introduced to clear OUR debts. As part of this, some new taxes are on the horizon which will reduce your rental yield once more. They are:

Water Charges

This will be based on usage, with all properties receiving some allowances. This will require the installation of water meters – who will be asked to cover that cost? It is not clear currently that this would be a tax deductible cost.

Property Tax

It is suggested that this will replace the NPPR charge. It will probably be based around property valuations with regards how much one will be charged. In recent media publications, a charge of €960 annually (€80 per month) was suggested.

 

PRTB – What do you do when circumstances changes?

What if you have a change in either tenants or rent charged – does PRTB need to know?

As far as the PRTB are concerned – this is called an update to an existing tenancy.

For example, if some of the tenants are replaced by new tenants (but at least one of the tenants remain in the rented property), then this is an update.

If there is a change of rent, where at least one of the tenants remain in the rented dwelling and the other tenants are replaced by new tenants, then this is an update.

The landlord is required to notify the PRTB, within one month of these changes along with details of any other changes of the tenancy details that have arisen in the interim.

No fee is payable when providing an update of tenancy details.

BER certificate & Rental property

From the 1st of January 2009 a BER certificate is compulsory for the majority of all rented properties.

A BER is similar to the energy label for a household electrical appliance like your fridge. The label has a scale of A-G. A-rated homes are the most energy efficient and G the least efficient.

This is a deductible cost against your rental income.

NPPR Deadline – 2011 Charge

Collection of the Non Principal Private Residence Charge for 2011 will commence on the 31st March 2011. The 2011 charge is based upon the ownership and status of the property on the 31st March 2011.

Please note that you must pay the NPPR charge for 2011 on or before the 30th June to avoid late payment fees.

The NPPR fee is €200 in 2011, which can be paid online.

The late payment fee amounts to €20 per month or part of a month and will continue to roll up as long as the charge remains unpaid.