Can I write off mortgage interest on rental property?

A

aBitTooFar

Guest
I read revenue Commissioner's [broken link removed] and in particular the calculation guide in part 2. I could see no reference to being able to claim mortgage interest on rented properties against tax. I would have expected line item 206 (b) (Rental Income from Land and Property in State / Interest) to figure in the calculation but it didn't.

I also read the key post Reveunue Guide to Rental Income (from 2002) in which is stated " Interest paid on monies borrowed for the purchase, improvement or repair the property" as an example of an expense that may be claimed against tax.


Question is: can you claim mortgage interest on a rental property against tax and if so where is this documented?
 
"Guide to Completing Pay & File" returns not mention interest on investment mortgages

delgirl said:
"Interest paid on monies borrowed for the purchase, improvement or repair of certain properties."

It's here in [broken link removed].
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The relevant content from the source delgirl quoted is "However, the relief for interest on borrowed money was restored for such interest accruing on or after 1 January 2002" but it doesn't say at what rate this is deductible. Is it the marginal rate or is it always at the lower rate?

What really confuses me is that the [broken link removed] which shows how to fill in the long version of [broken link removed] makes no mention of this when showing how to calculate my liability. If I follow this guide then my liability will be too high. I would have expected row number 5 (on page 52 of [broken link removed]) to reference line 206 (b) (page 8) from the long version of [broken link removed], but it does not.
 
Get professional advice if you are in any way unsure as to how to calculate your tax liabilities. If you overestimate your liability you run the risk of paying too much tax. If you underestimate, you face possible interest, penalties etc on the underpayment. Good professional advice should also help you to avail of tax planning and minimisation tips that some people miss out on.
 
Re: "Guide to Completing Pay & File" returns not mention interest on investment mortgages

aBitTooFar said:
but it doesn't say at what rate this is deductible. Is it the marginal rate or is it always at the lower rate?
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You can deduct the investment property mortgage interest in full from the rental income.

If your gross rental income is €12,000 and your annual mortgage interest is €8,000, you deduct the interest amount plus your other expenses (wear & tear, utilities, insurance, PRTB fees, Management Expenses, Repairs & Maintenance) to arrive at your net rental income figure of say €2,000.

Your tax liability is then 42% or 20% of this net total.

I am a landlord and have had good advice from a tax consultant - it may be worth your while to do the same. If you want his details, PM me.
 
You can write off mortgage interest on rental property

I phoned the Revenue Commissioners and confirmed that mortgage interest on investment property is deductible (as delgirl correctly said) and that the [broken link removed]may be misleading or incorrect.
 
I know it's too late now, but for future ref: if you file your return before Aug 31st the Rev will go through it and let you know if you over/underestimated your liability. Gives you plenty of time to correct any honest mistakes and avoid penalties/interest.
Also, I'm PAYE and I just use the short version of Form 11 to declare my rental income.
 
BigM said:
I know it's too late now, but for future ref: if you file your return before Aug 31st the Rev will go through it and let you know if you over/underestimated your liability. Gives you plenty of time to correct any honest mistakes and avoid .
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This isn't really true. What they do (regardless of whether you submit your return before or after Aug 31st) is issue a tax assessment based on the contents of your return. The only relevance of the Aug 31st date is that if you file before then, the Revenue will guarantee that they will issue you with an assessment by 31 October so you can then pay by that date.

However if there are errors in your returns, this will rarely crop up in the tax assessment process, unless you are talking about a basic error such as claiming a PAYE credit when you have no PAYE income. If there are omissions in your return (for example income left out or deductions, credits not claimed for) there is zero chance that these will be identified by the Revenue in the process of generating the tax assessment. As it happens, Revenue Tax Assessments based on paper-filed returns are notorious for containing errors so it would be foolish to rely on them without independently verifying their contents if you have filed a paper return.

Penalties, interest etc will still apply to any underpayment.
 
Also for any people with rental income i heard recently that you have to be registered with the PRTB in order to claim mortgage interest against your rental income. I didnt know that. Just as well i dont have any rental properties. .
 
ubiquitous said:
This isn't really true. What they do (regardless of whether you submit your return before or after Aug 31st) is issue a tax assessment based on the contents of your return. The only relevance of the Aug 31st date is that if you file before then, the Revenue will guarantee that they will issue you with an assessment by 31 October so you can then pay by that date.

However if there are errors in your returns, this will rarely crop up in the tax assessment process, unless you are talking about a basic error such as claiming a PAYE credit when you have no PAYE income.
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Thanks for clarifying Ubiquitous. a friend of mine said she got a reduced tax bill after filing before 31Aug - but maybe she just made a simple error like forgetting a credit/allowance.
 
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