Tax Tips for Landlords

 

Owning property can make your tax return a bit more complicated. 

If you are a landlord, here are a few more things to keep in mind when it comes to filing your tax return this October 31st:

 

1.Rent a room relief

It’s important to keep in mind, that if you rent a room in your principal residence to a third party you may be able to earn up to €12,000 tax free. If the amount you earn exceeds €12,000 the total amount will all be taxable. Revenue have recently released updated guidance for this relief, which specifically excludes the provision of accommodation to occasional visitors for short periods so for example Airbnb guests.  

 

2.Claiming rental expenses

If you rent out an investment property, one that is not your principal residence, there is no rent a room relief available, the entire rental profit is subject to tax. You will however,  be able to reduce the taxable profit by claiming rental expenses incurred such as 75% of your mortgage interest, repairs and maintenance, insurance and accountancy fees. Make sure you include these expenses in your tax return.

 

3.Rental losses

There is a common misconception that when a property is let, it only needs to be declared on a tax return once it is profitable. This is not the case. Your investment property information needs to be returned regardless of whether it is profit or loss making. However you should know that if you make a loss in one year this loss can be carried forward to reduce any future rental profits hence lowering your tax bill. If you have more than one property any losses you make can also be offset in the current year against other Irish rental profits.

 

4.Local Property Tax (LPT)

The LPT is payable on investment properties in Ireland. If you have not paid this you should do so straight away as revenue can withhold tax refunds or alternatively enforce surcharges on income tax returns.  It should be noted that Revenue are pooling all this information and cross referencing people who have paid the LPT against the rental income details of their tax return. LPT cannot be claimed as a deduction from your rental profit.

 

5.Private Residential Tenancies Board (PRTB)

Landlords must register all of their tenants with the PRTB. This is a once off charge and only becomes payable again once a new tenant is added to a property. Again Revenue are pooling all this information and cross referencing people who have paid the PRTB against the rental income details of their tax return. If you are not registered with the PRTB you will not be allowed to claim mortgage interest relief, so it is important you do this.

 

6.Overseas Properties

If you are an Irish resident, any rental income earned on an overseas property will also be subject to the Irish tax regime. You will be able to claim deductions to reduce your rental profit in the same manner as you would for your Irish property. 

You may also be liable to tax in the foreign country and should consult an accountant in the relevant country. If you pay tax abroad, you will be able to offset this against your Irish tax, provided Ireland has a double tax treaty with the foreign county.

Unfortunately however, any loss on foreign rental property is restricted to your foreign portfolio, it cannot be offset against Irish income. LPT and PRTB does not apply to foreign investment properties.

 

7.Joint Ownership

If you own a property jointly you will be taxable on your applicable percentage of rental income earned. You will also have the right to claim expenses of the property in this proportion and be taxed on that basis. You must simply contact the Revenue Commissioners to put this into place.

 

8.Commercial Property

If you let a commercial property you will be liable to tax on the rental profit earned. This is calculated in the same manner as a residential property, however you will be allowed claim 100% as opposed to 75% of the mortgage interest. Irish residential losses can be offset against Irish commercial gains, and vice versa.

 

9.Moving out and renting your home

Moving out of your property converts the house into an investment property rather than your Principal private residence. Any rental income (less any tax deductible expenses such as mortgage interest) on the let of your former home is taxable and would need to be declared on your tax return.

 

10.Bank Accounts

You may wish to consider operating a separate bank account for rental activities, to improve efficiencies from an administrative perspective.

 

If you are baffled by the property tax system, consider taking professional advice from an accountant. Their fees can be offset against tax. To make a query, just click HERE.

Date published 24 Aug 2015

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.