Allowable Expenses - 3 bed investment property

[NoRegretsCoyote]

It would be easy enough to filter out suspicious mileage entries for a closer look.

I don't think so.

Maybe 150k rental income returns every year with (say) three mileage claims each at civil service rates. This is tens of millions of euros in deductions. It is very difficult to build a system to flag anomalies given that there actually will be some landlords in Donegal with properties in Kerry, and others with genuine reasons to make multiple inspections.

The tax regime for landlords is already too complicated. I would just have a flat tax on all rental income (in the region of 20% to 30%) with no deductions for anything whatsoever. Very simple to calculate. Very simple to enforce.

Being a landlord is far more active than having an investment portfolio!

Being a landlord of an apartment and using a management agent is not very demanding on one's time or effort. Calculating your tax liability is quite straightforward.

An investment portofolio of dividend-paying stocks, ETFs, and bonds is less time consuming but try calculating your tax liability on your own!

 

[Baby boomer]

Being a landlord of an apartment and using a management agent is not very demanding on one's time or effort.

Isn't that precisely the point? If your managing agent does everything you won't have any mileage expenses! But if you do it yourself, you will.

We have a self- assessment tax system with a presumption of taxpayer honesty. (According to the Revenue's Taxpayer's Charter.) Difficulty in verifying mileage expenses is no excuse for not allowing them. Particularly as it's no more difficult for landlords than for any other self-employed trade or profession - probably a lot easier than most actually.

 

[NoRegretsCoyote]

Isn't that precisely the point? If your managing agent does everything you won't have any mileage expenses! But if you do it yourself, you will.

If you use a trading platform to buy and sell shares you have expenses which aren't tax deductible!

Everything type of investment has some cost.

People are having detailed arguments over what should and shouldn't be tax deductible from rental income. The whole regime is already over-complicated and should be simplified.

 

[Gordon Gekko]

Isn't that precisely the point? If your managing agent does everything you won't have any mileage expenses! But if you do it yourself, you will.

We have a self- assessment tax system with a presumption of taxpayer honesty. (According to the Revenue's Taxpayer's Charter.) Difficulty in verifying mileage expenses is no excuse for not allowing them. Particularly as it's no more difficult for landlords than for any other self-employed trade or profession - probably a lot easier than most actually.

If you fix the washing machine yourself, would you expect to pocket a callout fee (or at least write it off against tax)?

I’m as pro the taxpayer as the next person, but this is laughable stuff.

 

[Gordon Gekko]

It costs money to get an advisor to submit your tax return. Should taxpayers get a deemed write-off for doing it themselves?

 

[Baby boomer]

If you fix the washing machine yourself, would you expect to pocket a callout fee (or at least write it off against tax)?

I’m as pro the taxpayer as the next person, but this is laughable stuff.

Apples and oranges. If I fix the washing machine in a BTL I can write off materials or spare parts used. I can't (and wouldn't expect to, and never claimed I should) write off my labour or callout fee. It's a circular transaction anyway. If I got to write off my "callout fee" against rental income, I'd have to declare it as income from my incidental trade of fixing washing machines!

But mileage is different. Why should travel to visit a client be any different than travel to visit a tenant? It's a legitimate expense, wholly, exclusively and even necessarily incurred.

 

[Gordon Gekko]

Apples and oranges. If I fix the washing machine in a BTL I can write off materials or spare parts used. I can't (and wouldn't expect to, and never claimed I should) write off my labour or callout fee. It's a circular transaction anyway. If I got to write off my "callout fee" against rental income, I'd have to declare it as income from my incidental trade of fixing washing machines!

But mileage is different. Why should travel to visit a client be any different than travel to visit a tenant? It's a legitimate expense, wholly, exclusively and even necessarily incurred.

Because a client is a client of an active business that the person is spending all or most of their working time on.

A landlord receiving passive income from a tenant and choosing to drive a few kilometres with a hammer to stick up some shelves is a world away.

 

[NoRegretsCoyote]

But mileage is different. Why should travel to visit a client be any different than travel to visit a tenant? It's a legitimate expense, wholly, exclusively and even necessarily incurred.

Should you be able to claim mileage for travel to the AGM of a company you are a shareholder of?

The boundary is fuzzy between active and passive income of course. But you have to draw the line somewhere and being a residential landlord is more passive than active. Your equity is doing much more work than you are.

 

[Baby boomer]

Should you be able to claim mileage for travel to the AGM of a company you are a shareholder of?

No. Unless you're also a director or employee.

The boundary is fuzzy between active and passive income of course. But you have to draw the line somewhere and being a residential landlord is more passive than active.

Debatable. Tell that to a landlord struggling to get an overholding tenant out. Passivity won't get you very far.

Your equity is doing much more work than you are.

Investing in a REIT shareholding is passive. Managing one BTL considerably more active. Managing ten or twenty might be close to a full time job.

 

[Baby boomer]

Because a client is a client of an active business that the person is spending all or most of their working time on.

There is absolutely no requirement that the taxpayer should be spending all or most of their working time on their business. It's possible to have a very passive business with income largely driven by historical but ongoing commission or royalties.

A landlord receiving passive income from a tenant and choosing to drive a few kilometres with a hammer to stick up some shelves is a world away.

Easy to pick a trivial example. But you can't avoid the fact that it's necessary to either incur travel costs or pay somebody to do it for you. Either way, costs legitimately incurred should be deductible. As they are in the UK, Germany and presumably most normal countries that don't demonize landlords.

 

[murphaph1]

I disagree.

I do my own tax return. I could pay someone €1,000 to do it. I don’t think that I should be able to charge for my time.

Management charges aren’t deductible for an investment portfolio. I can’t deduct the cost of my taxi if I go to meet my investment manager.

I’m very much pro the taxpayer but I think it would be preposterous to allow landlords to deduct for their own time or mileage.

Whether they do it in Germany or not is irrelevant.

It's not irrelevant. The German and UK tax codes allow mileage as they are legitimate expenses. Neither code allows you to claim for your own labour, which is entirely appropriate, but the cost of getting to the property is a legitimate expense that comes directly out of the rental income. The state isn't paying me in Germany to go and fix the dishwasher in apartment x. The state simply recognises, that I incur a real and legitimate expense in doing so, namely my travel costs. The Irish tax code is the outlier in my (albeit limited) experience.

 

[murphaph1]

Because a client is a client of an active business that the person is spending all or most of their working time on.

A landlord receiving passive income from a tenant and choosing to drive a few kilometres with a hammer to stick up some shelves is a world away.

Surely the amount of time spent maintaining ones properties would be a function of the number of properties held. If I had (and I don't) 100 units and it was a full time job for me, would you then see it differently? It appears so from your statement above.

 

[murphaph1]

It costs money to get an advisor to submit your tax return. Should taxpayers get a deemed write-off for doing it themselves?

But you didn't actually incur the expense if you did it yourself. You are talking about "claiming for your time" again and nobody is claiming that this should be allowed. The equivalent argument would actually be if you had to drive somewhere to submit your tax return and if that was the case for some reason then that should be deductible expense. Of course it's difficult to argue that you needed to drive somewhere to submit a tax return as even a paper return would generally be posted in. If you have to drive to repair a washing machine, you do incur a legitimate expense.