Renting Out Your Holiday Home

Guide to renting out property

With the summer months upon us the issue of renting out holiday homes comes to the fore. Here we take a look at all you need to know if you have a property either here or abroad.

Renting out an Irish holiday home- what you need to know

Beginning of the tenancy

If you are renting out a holiday home in Ireland you need to register with the Private Residential Tenancies Board (PRTB) and each separate letting has to be registered. It is important to register with the PRTB as the tenancy has to be registered before you can claim back tax relief on mortgage interest. 

How much tax do I pay on my rental property?

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

Income tax for rental income is at either 20% or 41%, whichever applies to you. The USC rate payable is between 2% and 10%. Non PAYE earners will also pay PRSI of 4%.

If you are making a loss, you do not need to pay tax  but still need to inform the Revenue about your rental income so you will still have to file a return. Renting out a room in your principal private residence  if the rent comes to less than €10,000 for the year, this is tax free.  However, you must still submit a tax return to claim this relief.  You can do this by submitting a Form 12 which is a shorter version of the normal tax return.

Which expenses can be claimed?

At the beginning of the tenancy, make sure to keep a record of the cost of furniture and fittings in the property, then continue to maintain records from the date of first letting, including income and expenses.

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
• Legal fees incurred when drawing up the lease
• PRTB registration fee
• Most mortgage protection policy premiums
• Fees paid to accountants for preparation of rental accounts
• Service charges if these are paid by the landlord and no separate payment is received from the tenant(s), for example bin charges, electricity, gas, phone rental etc.
• Rates paid to a local authority

There is also an allowance for wear and tear of furniture and appliances. 12.5% of the cost of furniture and appliances can be offset per annum for 8 years. For example, if you purchase furniture for €1,000, for the next 8 years you can offset €125 each year against the rental income (1000 * 12.5%). It is important to note that mortgage interest tax relief at source (MITRS) cannot be claimed while renting out a property.

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 must also pay Irish tax on this income however you can claim a credit for any foreign tax you have already paid so that you don’t pay the tax twice.

The same restrictions apply as if it was an Irish property e.g. motor and travel costs are not an allowable expense. Any loss made on a foreign property can be set against any profit another foreign property or carried forward to future years. A loss on a foreign property cannot be set against income from an Irish property or vice versa.

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

Date published 5 Jun 2013

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.