Tax on Rental Income – The Basics

April 14, 2016

Rental Income is taxable under the Irish tax system. For a given year, you can estimate your tax liability using the following formula:

Gross Rental Income  – Allowable Expenses – Capital Allowances = Taxable Rental Income x  Your marginal income tax, PRSI & USC rate = Your tax liability.

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Allowable Expenses

You can deduct the following expenses in arriving at your taxable rental income.

  • Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property (note the restrictions below)
  • Mortgage Protection policy premiums
  • Water rates, Ground rent, Service charges, Waste Collection charges etc
  • Insurance costs
  • Management & rent collection costs
  • Advertising Costs
  • Legal fees for drawing up leases or collection of unpaid rent
  • Accountancy fees relating to rental income
  • Repairs, decorating and general maintenance
  • Cleaning & related costs
  • Cost of any unreimbursed services or goods provided to tenants by the landlord i.e. electricity, heating, etc

Mortgage Interest – Restrictions              

Your mortgage interest deduction is restricted to 75% of the total interest you incur.

Mortgage interest is only allowed as a deduction against rental income on a residential property if you have complied with your legal obligations under the Residential Tenancies Act, including registering tenancies with the Private Residential Tenancies Board (PRTB).

It is generally not possible to claim for the following expenses:

  • Pre-letting expenses, apart from auctioneer’s letting fees, advertising fees and associated legal fees
  • Capital expenditure.

Capital Allowances

You can claim an allowance for Wear and Tear on furniture and fittings in your property.   This normally will cover such items as carpets, electrical appliances, central heating, furniture, etc.    The allowance is 12.5% per year, each year for 8 years.

Rental Losses

You can only offset a rental loss against other rental income, in current or future years.

It is not possible to offset such losses against other non-rental income sources (e.g. PAYE, business profits etc).

Self-Assessment Tax Collection

The tax due on rental income is normally collected under the Self-Assessment system. A  PAYE taxpayer with low rental income can arrange to have their tax collected via the PAYE system if Revenue agree to adjust their tax credits and standard rate cut-off point accordingly.


The Local Property Tax Explained in 3 Minutes

May 27, 2013

Ahead of this week’s Local Property Tax (LPT) deadline, this 3-minute video from Chartered Accountants Ireland is well worth watching.

It features the Institute’s Tax Director, Brian Keegan, who explains:

  • the self-assessment basis for the LPT,
  • issues for PAYE and self-employed earners,
  • the interactions between LPT & other taxes,
  • other practical issues.


Chartered Accountants Rule Out Pay & File Changes

April 19, 2013

Chartered Accountants Ireland have today slammed as “simply impossible”, a proposal to bring forward the annual Income Tax pay & file deadline for self-assessed taxpayers.

This follows a report earlier this week that the annual 31 October deadline, for Form 11 tax returns, was to be changed from 31 October to a “much earlier” date.

Help - Self Assessment Tax Return

In a note to its members this afternoon, the accountants’ Institute states that it has received confirmation from the Department of Finance that the self-assessment Income Tax payment date of 31 October “will not be brought forward in 2015”.

The timing of the annual Pay & File tax deadline is now a live issue, as the terms of the EU Stability and Growth Pact now require Ireland to complete its annual exchequer Budget much earlier than the traditional first week of December.  For this reason, Budget 2014 is scheduled for 15 October next.

The level of self-assessment tax receipts is always a key factor in each year’s Budget and the Dept of Finance will now face additional difficulties in preparing annual Budgets before they can confirm the amount of self-assessment taxes receivable in late October/early November.

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However, Chartered Accountants Ireland have now reiterated to the Department of Finance, their belief that “it would be simply impossible for indigenous Irish business to comply with earlier Self Assessed Income Tax payment and filing arrangements“.

They have also highlighted “the disruption and administrative burden which would follow if the filing date was to be brought forward“.

The shelving of the earlier tax deadline would be a welcome relief for tens of thousands of business taxpayers and other individuals who are obliged to file self-assessment returns in respect of rental and other income.

It would also avert a threatened nightmare for workers in accounting and book-keeping  firms who already face considerable pressure and stress in managing the annual tax return deadline season.


Earlier Pay & File Tax Return Deadlines On The Way?

April 18, 2013

The annual self-assessment tax filing deadline is set to be brought forward to a “much earlier” date, according to a report by Brendan Keenan in Monday’s Irish Independent.

At present, self-employed individuals, company directors and others must file their annual Form 11 income tax return by 31 October. A later deadline of mid-November applies to online returns.

Pay & File Tax Deadline

Under new Eurozone financial monitoring rules, the Irish government will apparently be obliged to bring forward the annual Budget from December to October each year. Accordingly, the 2014 Budget has been scheduled for 15 October this year.

Self-assessment taxpayers will have a further month, until 14 November, to declare and pay their Income Tax liabilities for 2012 and Preliminary Tax payments for 2013.  This means the Dept of Finance will be framing the 2014 Budget without knowing the total amount of tax receipts for 2013.

In order to prevent this anomaly becoming an annual problem, it is now being suggested that the tax return deadline be moved forward next year.

If the tax deadline is brought forward by 7 weeks, in tandem with the change of date for Budget Day, this would suggest a new Pay & File deadline date in early-to-mid September. If the current online filing extension is continued, we can expect the final deadline in late September for online returns.

This would represent a major change, both for self-assessment taxpayers and for accounting and book-keeping firms who prepare tax returns for their clients.

It takes quite a leap of faith to expect that accounts staff will be happy to work crazy hours preparing tax returns throughout the month of August, when everyone else enjoys their summer holidays.

On that basis alone, I would have serious doubts over the feasibility of a September tax deadline.

Remember than two years ago, the 2011 Finance Bill included a proposal to bring forward the Pay & File deadline by one month t0 30 September.  This quickly attracted controversy and was later quietly dropped.

Sadly, with the EU now setting the agenda, its quite likely that the tax authorities will have no wriggle-room this time.

Interesting times ahead for us all…