Landlords 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. It’s rarely as bad as you may think!
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 Residential Tenancies Board in relation to any tenancies in the particular premises. See www.rtb.ie for an application form.
IMPORTANT: To claim interest relief for the 2020 tax year, please submit your claim and get registered prior to the end of 2020 (or before you submit the 2020 tax return due by 31 October 2021).
From 7th April 2009 only 75% of mortgage interest paid on a residential property is allowable as a tax deduction against rental income. This has increased to 80% with effect from the 2017 tax year, 85% in the 2018 tax year and has been re-instated to 100% for the tax year 2019 onwards.
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 | 300 | 3,600 | |||
| of which balance is capital | 800 | 9,600 | |||
| 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 | |||||
| 100% of annual mortgage Interest (e3,600). There is no tax deduction for the capital portion of the mortgage payment) | 3,600 | ||||
| PRTB | 90 | ||||
| House Insurance | 350 | ||||
| Mortgage protection payments | 192 | ||||
| Accountancy | 200 | ||||
| Repairs miscellaneous | 500 | ||||
| Depreciation on Furniture, Fixtures & Fittings | 800 | ||||
| Taxable Profit | 5,068 | ||||
| Taxed at (depending on other income i.e. Employment income etc): | |||||
| 20% income tax + 4% PRSI + USC @ 0.5% – 4.5% | 1,444 | ||||
| or | |||||
| 40% income tax + 4% PRSI + USC 4.5% – 8% | 2,635 | ||||
| ** So while this property makes a loss for the Landlord they | |||||
| could have a tax bill of €1,444 – €2,635 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
- LPT is not a tax deductible expense and failure to keep same up to date can result in an additional penalty of 10% being applied to any tax liability arising when submitting your tax return
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
-
Register all residential properties with the RTB. Failure to register with the RTB not only prevents you from claiming your mortgage interest as a deductible expense, the RTB also has its own fines for failing to register
-
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.