Landlords

landlord tax adviceLandlords in receipt of rental income from residential or commercial property are obliged to submit tax returns annually whether the property is profit making or not.

If you have been renting a property but failed to make any tax returns or may also have continued to claim TRS payments while no longer living in the house, we can arrange to submit all the outstanding tax returns and potentially arrange an instalment plan with Revenue to cover any taxes due.

If you have more than 1  year’s tax return to file email us at info@knowyourtax.ie and we’ll will give you an accurate quote to bring your tax affairs up to date (plus discounts for more than 1 return) . Nationwide & worldwide service!!

Residential Properties

*** For the year 2006 onwards mortgage interest is not deductible where the person making the claim has not complied with the registration requirements of the Private Residential Tenancies Board in relation to any tenancies in the particular premises. See www.prtb.ie for an application form.

IMPORTANT: To claim interest relief for the 2016 tax year, please submit your claim and get registered prior to the end of 2016 (or before you submit the 2016 tax return due by 31 October 2017).

From 7th April 2009 only 75% of mortgage interest paid on a residential property is allowable as a tax deduction against rental income. This will increased to 80% with effect from the 2017 tax year, 85% in the 2018 tax year and this will increase by 5% per year until the 100% mortgage interest relief is re-instated.

Landlords are also obliged to pay an annual fee of €200 to their local county/city council. Late payment of this fee results in a penalty of €20 per month or part thereof. See www.nppr.ie. This charge ceased in 2013.

Failure to pay your LPT before submitting your tax return can result in a 10% penalty being applied to any tax liability arising.

Sample Tax liability Landlord
 
Rental Income & Expenditure Accounts
Monthly Annually
Rental Income (12 months)            900                      10,800
Monthly Mortgage repayment          1,100                      13,200
Of which relates to mortgage interest              600                        7,200
of which balance is capital              500                        6,000
PRTB                              90
House Insurance                            350
Mortgage protection payments                16                            192
Repairs miscellaneous                            500
Accountancy                            200
Depreciation on Furniture, Fixtures & Fittings 800
Cashflow Loss (4,532)
HOWEVER, FOR TAXATION PURPOSES THE TAX ADJUSTED
PROFIT/LOSS IS ACTUALLY CALCULATED AS FOLLOWS
Rental Income                      10,800
Less
75% of annual mortgage Interest (e7,200 * 75%). There is no tax deduction for the capital portion of the mortgage payment)                        5,400
PRTB                              90
House Insurance                            350
Mortgage protection payments                            192
Accountancy                            200
Repairs miscellaneous                            500
Depreciation on Furniture, Fixtures & Fittings                            800
Taxable Profit                        3,268
Taxed at (depending on other income i.e. Employment income etc):
20% income tax + 4% PRSI + USC @ 3% – 5.5%                      964
or
40% income tax + 4% PRSI + USC 5.5% – 8%                1,667
** So while this property makes a loss for the Landlord they
could have a tax bill of e964 – e1,667 depending on their other
sources of taxable income

 

 

Rental Income & Expenditure Accounts (Residential & Commercial)

The following are examples of the type of expenses that may be claimed for:

  • Rents payable by the landlord in respect of the property, e.g. ground rent
  • Rates or levies payable on the property, i.e., water rates, refuse collection etc.
  • Cost of any service or goods provided by the landlord, e.g. gas, electricity, central heating, telephone rental, cable television etc. for which they do not receive a separate payment
  • Maintenance, e.g. cleaning and general servicing of the premises
  • Insurance of the premises against fire, public liability insurance, etc.
  • Management, e.g. actual cost of collection of rents, advertising, etc.
  • Legal fees to cover the drawing up of leases or the issue of solicitors letters to tenants who default on payment of rent.
  • Accountancy fees incurred for the purposes of preparing a rental income account.
  • Wear and tear on furniture and fittings, e.g. carpets, cookers, central heating etc.
  • Interest paid on monies borrowed for the purchase, improvement or repair of certain properties.
  • Repairs, e.g.. decorating and general upkeep of the property. A ‘repair’ means the restoration of an asset by replacing subsidiary parts of the whole asset. Examples of common repairs which are normally deductible in computing rental profits include:
    • exterior and interior painting and decorating
    • damp and rot treatment
    • mending broken windows, doors, furniture and machines
    • replacing roof slates.

    However, landlords may not claim a deduction for their own labour.

  • Certain mortgage protection policy premiums with effect from 1 January 2002.
  • Capital Expenditure on certain properties under the various Incentive schemes.
  • The NPPR charge of €200 is NOT an allowable tax deduction
  • Q  I am a landlord and have paid Local Property Tax (LPT) on my rental properties. Is the LPT that I paid an allowable deduction against rental income? The Government has accepted in principle the recommendation in the Thornhill Report that LPT be a deductible expense in calculating a landlord’s taxable rental income and that the deduction be phased in over a number of years with the start date being determined by the economic and budgetary situation. However, the Government has not yet decided to bring the deduction into effect. Until the necessary amendment is made to section 97 of the Taxes Consolidation Act 1997, LPT is not a deductible expense and therefore should not be claimed as a deduction when submitting your Income Tax/Corporation Tax Return for 2013.February 2014 http://www.revenue.ie/en/tax/lpt/faqs/general.html#section9

Rental income losses are available for carry forward against future rental profits only (either residential or commercial).

Commercial Property

Ensure you are compliant with the correct VAT consequences of renting a property, these vary on a number of factors i.e. short-term leases, long leases etc.

First Time Landlords

If you are a first time landlord there are only a few steps that need to be put in place

  • If the property was previously your PPR and you are still receiving mortgage interest relief on the loan, you need to inform the TRS section by completing Form TRS4 and your TRS will be cancelled
  • Register all residential properties with the PRTB. Failure to register with the PRTB not only prevents you from claiming your mortgage interest as a deductible expense, the PRTB also has its own fines for failing to register
  • Register the property with the NPPR and pay the €200 fee. There is a penalty of €20 per month or part thereof for each month that the property is late being registered (for landlords who rented for the first time in 2013 or earlier)
  • Register as  a landlord with Revenue by completing a Form TR1
  • Preferably set up a separate bank account for rental income & expenditure. Keep all receipts for expenditure relating to the property
  • Submit your tax return annually. Late submission can also lead to interest and penalties

Foreign Rental Income

In general, rental income from foreign property is computed on the full amount of the rental income receivable in a year regardless of whether the income is ever received in Ireland. The taxable rental income is calculated in the same way as taxable rental income from an Irish property with the same deductions and allowances being available. Deductions are also normally available where tax has been paid on the rental income in the country in which the property is situated.

A foreign rental loss can only be set against rental profits from other foreign properties. It can be set against such profits for the same year or, if there are none or insufficient profits, the unused loss can be carried forward and set against any profits from the same property, or other foreign property, in subsequent years. It cannot be set off against profits from Irish rental properties.

Preparation and Submission of Rental Accounts and Tax Returns start from €200. Discounts are offered where more than 1 year’s accounts are being filed.

This is a Nationwide Service. Contact us for an accurate quote.