Renting out your holiday home- Tax situation

When you buy a holiday home the last thing on most peoples mind is the tax implications. Unfortunately, even if you find you aren’t making a profit you still have to tell the taxman. Here we discuss all you need to know, tax wise, if you own a holiday home.

What do I have to do?

 If you own a holiday let, either in this country or overseas, then you need to declare income from this to the Revenue commissioners every October by filing a self assessed income tax return.

How much tax do I pay?

Tax is paid on the profit you make on renting out your property and this is calculated by subtracting your allowable expenses from the gross rental income which you receive.

If you are making a loss, you do not need to pay tax but still need to inform the Revenue.

What expenses can be claimed?

Expenses relating to the property after the date of first letting can be claimed against your rental income. These include:

• Mortgage interest on loan to acquire property (restricted to 75% of interest for residential property)
• Repairs, for example damp and rot treatment, repairing broken windows or appliances(though not if you carry out the repair work yourself)
• Maintenance, for example cleaning, painting or decorating
• Management and estate agent fees
• Advertisement expenses
• Insurance premiums

NPPR

From 2009- 2012 there was a charge of €200 called the NPPR on rental properties and holiday homes situated in the Ireland, but not mobile homes. This charge is now gone but if you have yet to pay it the Revenue can still pursue you.

Household Charge and Local Property Tax

The Household charge was introduced by Government in budget 2012 and applied to both private residential and investment properties .This was a flat fee of €100 per property. This charge has now been replaced by the local property tax, but Revenue can still pursue any outstanding charges. The local property tax replaced the household charge in 2013. The tax is calculated based upon the value of your property. It applies to both private residential and investment properties. Revenue are pursuing this tax forcefully and have several successful methods of collection, for example reducing individuals tax credits accordingly and withholding tax refunds due to individuals and companies.  

Foreign properties

If you are renting out a property in a foreign country you must first pay any local taxes that arise on the property. As an Irish resident, you must also pay Irish tax on this income however you can claim a credit for foreign tax you have already paid so that you don’t pay the tax twice, subject to tax treaties in place between Ireland and the foreign country. If you incur a loss on your foreign property in a year, it can be carried forward for offset against future foreign rental profits.

Special tax schemes?

Many Individuals in Ireland purchased investment properties via special incentivised schemes during the Celtic Tiger era. These schemes provided a tax break to the individual. Over the past couple of years, Revenue have moved to abolish and eliminate these schemes. If you purchased a property under one of these schemes it may be useful to determine the type of scheme and the effects of revenues eliminating provisions as soon as possible.

TaxAssist Accountants can assist you in preparing your tax return, contact us today.

Date published 9 Jul 2014

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.