Do you have a rental property in Ireland or overseas? If so, you may have a tax liability on the income and must prepare and file an Irish tax return.
The tax due on rental income is collected under the self-assessment system, i.e. you must file an annual tax return disclosing details of your rental profit or loss and pay the tax arising when filing your return with Revenue. Rental income relating to the 2011 tax year is due to be filed in your 2011 tax return.
What expenses am I allowed to deduct from my rental income in relation to the property?
The following are examples of the type of allowable expenses:
- Rates, service charges, waste collection etc;
- Mortgage interest paid on monies borrowed for the ‘purchase, improvement or repair’ of the property’;
- Management fees;
- Accountancy fees;
- Legal fees relating to drawing up of leases;
- Repairs, decorating, general maintenance and cleaning costs;
- PRTB registration fees;
- Certain mortgage protection premiums.
In addition, a wear and tear allowance can be claimed in respect of furnished lettings. This will normally cover electrical appliances, furniture and fittings etc.
Mortgage interest accrued in 2011 is restricted to 75% in respect of residential lettings.
Don’t forget to register your Irish rental property with the PRTB!
If you fail to register with the PRTB, you will lose your entitlement to claim mortgage interest as a deduction against your rental income from that property. This is very penal and, as such, you should ensure that all your Irish rental properties are registered.
What if my expenses exceed the rent I receive?
A loss will arise if total allowable expenses are greater than the rents received. This loss can be set against any profit from renting other Irish properties or carried forward against future rental profits. Unfortunately, such losses cannot be used to shelter non-rental income.
I am renting a room in my home, is this rent taxable?
Where you rent a room (or rooms) in your home and the rent received, including sums arising for food, laundry etc, does not exceed €10,000, this income is exempt from income tax. However, this income must still be declared in your annual tax return.
Room rentals coming within the scope of this scheme do not affect your entitlement to mortgage interest relief or the capital gains tax exemption on the subsequent disposal of your home.
I have a foreign rental property, is the income from this taxable in Ireland?
Although, this depends on your residence status, most Irish people living in Ireland are taxable in Ireland on their worldwide income. This includes rental income from foreign properties.
Irish income tax is payable on the net rental profit and this is calculated in the same way as the taxable rental income from an Irish property with the same deductions and allowances. This may mean that, although you may not have a tax liability in the foreign country where the property is situated, you may have an Irish tax liability due to the different methods of calculation. A credit is normally available for any foreign tax paid on the rental income in the country in which the property is situated.
The above information should be treated as a guide only. If you would like assistance with your tax affairs, contact Coll & Co Chartered Accountants, Barna by phone on 091-592080 or by email at firstname.lastname@example.org.
Coll & Co specialises in personal tax and pensions advice. Coll &Co, Chartered Accountants is regulated by the ‘Chartered Accountants Ireland’ to provide investment advice. If you want to subscribe to Coll & Co’s free monthly newsletter, log on to www.coll.ie and fill in the details.