Form 11 - Division of Rental income betwen spouses?

Just a quick question.

On a form 11 if spouses jointly own a rental property and / or own some shares in both names and they are jointly assessed for tax how do you properly complete a form 11.

One could assume that the rental income is divided exactly in two and half goes in his box and half in her box on the paper or electronic form 11.

Likewise for dividend income do you just add up the total and divide it by two?

Doing it half each seems to reduce the tax liability - I guess to do with unused credits etc

If anyone knows for sure please advise. Thanks!

A supplementary question!

I just noticed that if 100% of the rent / dividend income is assigned to the lower earning spouse then the tax liability reduces even further (significantly!!).

Are you allowed to do this?? I can't see why not myself as I assume all that's happening is that the lower earner is using more of their tax credits / allowances?

I hope I am right and would love someone to be able to confirm.

BTW - I am using the ROS offline forms so I can see the impact of putting the various figures in different boxes immediately which prompted my second question

If the property is jointly owned then income/expenses should be split equally between the spouses. One cannot arbitrarily allocate all the income to the lower earning spouse just because that produces a more favourable result.

Ok Graham - I thought I was getting into the realms of the often used phrase 'tax efficiency' but just as a minor challenge to what you are saying in reality it is the lower earning spouse who puts all the work into the rental property i.e. advertises for tenants, draws up leases, takes inventories, deals with all the problems and repairs. Why should that person not claim all the income especially since they only work part time and this extra rent income in effect facilitates their ability to work part time?

Unfortunately self-employed people and those with unearned income do not get a tax deduction specifically for their time and effort. What ultimately matters is the facts of the case. One could always re-organise ones affairs however by transferring the property to have the income and leases held by the lower earning spouse. That may have a once off cost but longer term benefits. Any such decision should be taken after professional advice however.

Ok Graham - that is not a crazy idea especially since the lower earning spouse is now, for 2010 tax purposes and beyond, a homemaker with no other income!

So for now I assume I;
split rental income exactly 50:50
split the property expenses exactly 50:50 & therefore show identical profit per person

Should I do the same for dividend income i.e. 50:50 and finally for expenses such as refuse charges we have paid does it matter if we split who paid them or not?

kfpg said:

Ok Graham - that is not a crazy idea especially since the lower earning spouse is now, for 2010 tax purposes and beyond, a homemaker with no other income!

So for now I assume I;
split rental income exactly 50:50
split the property expenses exactly 50:50 & therefore show identical profit per person

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If you are doing this, be careful that you are not exposing the lower earning spouse to a mininum PRSI charge of €253. Where this applies, it is dubious whether it is worthwhile to divide rental income between spouse.

kfpg said:

Should I do the same for dividend income i.e. 50:50

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only if the shares are jointly owned.

kfpg said:

finally for expenses such as refuse charges we have paid does it matter if we split who paid them or not?

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No, it doesnt matter. I would just claim them via the higher earning spouse, no point in overcomplicating things.

T McGibney said:

If you are doing this, be careful that you are not exposing the lower earning spouse to a mininum PRSI charge of €253. Where this applies, it is dubious whether it is worthwhile to divide rental income between spouse.

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True, however as long as the non-earning other spouse's share of net rents exceeds c. €1,200pa and assuming there is a transfer from 41% to 20% liability then the tax saved would cover the PRSI due. The PRSI paid may give future benefits.

Another thing, the OP mentioned being a homemaker for 2010. If there are dependent children and an existing claim is made for home carer credit then that €900 may be lost if the spouse earns over the cut-off for the H/Carer credit. That may also negate or reduce any other tax benefits.

Not sure what a minimum PRSI charge is and how it arises but anyway the homemaker will have 2 dependent children and at this moment in time don't know what a home care credit is or it's implications?

Thanks for the helpful responses thus far!!

Graham_07 said:

True, however as long as the non-earning other spouse's share of net rents exceeds c. €1,200pa and assuming there is a transfer from 41% to 20% liability then the tax saved would cover the PRSI due.

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... just about - in my experience usually not to the extent that would make the exercise worthwhile.

The point about PRSI and future benefits is arguable but hardly a priority for most people.

Your point about home carer credit is an excellent one.

kfpg said:

Not sure what a minimum PRSI charge is and how it arises but anyway the homemaker will have 2 dependent children and at this moment in time don't know what a home care credit is or it's implications?

Thanks for the helpful responses thus far!!

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The Home Carer Tax Credit is worth €900pa. If the income of the home carer exceeds €6,880 then this goes. ( There is a scaling down of the relief between €5,080 and €6,880 ). So giving the home carer spouse rental income may result in withdrawal of this relief.

PRSI is charged at class S on rental income. Benefits are maternity benefit and state pension. There is a minimum contribution of €253pa .