2 people own a property, how to handle the income tax (rental income less costs)

If two people own a property, how should the income tax (rental income less costs) be filled in on income tax returns? Should it be split in half or should one person only put in the tax returns?

If two people own the property it has to be split between the two. If one partner is working and the other is not, it might be a good idea to transfer the property to the partner who is not working for tax purposes.

delgirl said:

If two people own the property it has to be split between the two. If one partner is working and the other is not, it might be a good idea to transfer the property to the partner who is not working for tax purposes.

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Are you sure about this? Transferring the property is hardly a practical solution.

What if one or more of the co owners are not resident in the Republic of Ireland?

ajapale said:

Are you sure about this? Transferring the property is hardly a practical solution.

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It's a very practical solution when a property is co-owned and one spouse is not working to transfer the investment property to the sole ownership of the non-working spouse in order to take full advantage of the non-working spouse's tax credits. This maximises the amount of income that would qualify for the 20% tax rate.

Married couples can transfer assets between them without having to pay capital gains tax, stamp duty or gift tax.

I would have grave reservations about the wisdom of conveyancing a property between spouses just to save a few bob in income tax.

The OP may need to register a partnership with Revenue, complete partnership accounts and allocate the respective profit/loss shares to each partner, for inclusion in their respective tax returns.

I suppose it depends on your financial circumstances - how many investment properties you have and how much profit you are making, what tax band your spouse is in, etc. I can only say it worked well for us and was easy to do.

It's recommended by [broken link removed] and Cathal Maxwell of paylesstax.ie.

I also met with a tax consultant who advised us to do the transfer.

I still think its a bad idea.

- it is likely to breach Revenue anti-avoidance legislation, which nullifies artificial tax-saving transactions.
- it may attract Revenue attention and increase the risk of audit.
- there will be legal fees on the transaction.
- there may be a minimum PRSI charge on the non-earner spouse.
- it may lead to serious complications in the event of relationship break-up between the parties, or if either party dies unexpectedly.

Transferring income-producing assets between spouses to reduce tax is a good idea and will not lead to problems with the Revenue if it's a genuine transfer, i.e. ownership is fully transferred, without any restrictions such as that the property will transfer back to the original owner after a set number of years etc.

Problems in the event of an unexpected death of either spouse can be taken care of by making wills.

However, problems may arise if the marriage breaks down, so if in doubt, don't transfer.

Also if the property is mortgaged, it may be difficult or impossible to transfer if the lender won't agree to it. Also a valuable tracker or fixed rate may be lost.

Is there not also a stamp duty issue with this aswell

Galwayboy said:

Is there not also a stamp duty issue with this aswell

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There may be. Prior to the latest budget transfers between spouses were exempt from stamp duty, not sure, if it's still the case.

Though stamp duty has been greatly reduced, so over the long run tax saving should be worth paying stamp duty and legal costs of transfer.

However, everyone's circumstances are different, so it's best to calculate how much such a transfer would benefit the couple. For example, if taxable income is low due to high interest on the mortgage and the intention is to stop renting the property within a few years, then it's not worth transferring and incurring the expense and the hassle.