I used to see landlords in a different light - not so now

[mrso'brien]

Thank you very much Bronte. You have saved me a lot of hassle and confusion with that list. I hadn't a clue about the deductions/reliefs.

Thanks also to everyone else who posted on this thread too...it's a pity Revenue wouldn't make it as clear as you have made it.

 

[T McGibney]

Bronte, The NPPR €200 is not deductable against rental income.

Note that Revenue have never actually confirmed this position publicly (although the has quoted a Revenue 'indication' to this effect). Until and unless they do, there remains some doubt as to whether the charge should be deductible.

 

[T McGibney]

P.S. Revenue told me that if you are PAYE you can just send the form back with your P60 to them instead of registering yourself as self-employed if you are renting out a house.

In my experience, Revenue normally insist that the taxpayer registers for self-assessment in respect of rental income.

 

[Bronte]

. You have saved me a lot of hassle and confusion with that list. I hadn't a clue about the deductions/reliefs.

.

I'm not an accountant so be careful this is just a web forum. In any case to you and others who don't know how to do accounts you will save yourself money in the long run if you hire an accountant for the first year at least. And this is also tax deductable. Getting it wrong can cost you.

 

[RMCF]

6000 rent less

200 NPPR

QUOTE]

Bronte, The NPPR €200 is not deductable against rental income.


OP, Is your husband/wife working? If a spouse is not working(or has a low salary), the lease is in his/her name then he/she pays tax on rental profit at the lower rate of 21%(or whatever it is) rather than 41%.

Unfortunately, we both earn enough to have to pay 41%.

 

[RMCF]

6000 rent less

845 75% interest
90 PRTB
Rates/water
Depreciation 12.5 %
Advertising
Gardening
Repairs
house insurance
life insurance (as long as it's term insurance)

The NPPR is not allowable, but we are all hoping revenue will change their minds on this the same as they did (after many years) for the life insurance

You shouldn't need an accountant as it's very simple in your case, you're only adding to your costs, unless you feel you can't manage it yourself. Those fees are in any case deductable.

One question, your rent is only 115 a week. Is it a one bed appartment?

No, its a 3 bed semi. But the approx figure I have given is the going rate around here. We aren't in Dublin !!

Thanks for the list above - its most helpful knowing what you can and can't claim for. Is this the total list?

Also, re: house/life insurance, is the full amount that you pay for insurance tax deductible? And that depreciation figure, is that a guide or is the 12.5% a set figure that everyone gets?

 

[RMCF]

btw, I think I will hire an accountant for the 1st year at least.

I was quoted around €200 - €250 for the service. I think thats not bad if they do it properly and perhaps save me the hassle from Revenue should I be audited.

 

[RMCF]

Couple of extra questions:

1) Pre-letting expenses not allowed?

- If true, does this mean that if I buy stuff now for the house to furnish it or provide white goods, or paint it, can I not claim for this? After all, I am getting the property ready for a tenancy, so this should be deductible. Right?

2) Paying this 41%.

- I have it in my head that because we as a couple are in the 41% tax band, that the entire rental income, of say €6000, is subject to tax at 41%. Is this true? I read that its 41% of the profit, not the rental income? Could someone give a simple guide as to what the 41% is of, because I have it in my head that we have to pay 41% on the €6k (minus expenses of course). Perhaps I'm wrong.

 

[T McGibney]

2) Paying this 41%.

- I have it in my head that because we as a couple are in the 41% tax band, that the entire rental income, of say €6000, is subject to tax at 41%. Is this true? I read that its 41% of the profit, not the rental income? Could someone give a simple guide as to what the 41% is of, because I have it in my head that we have to pay 41% on the €6k (minus expenses of course). Perhaps I'm wrong.

Apologies for asking but is this some sort of windup?

You previously mentioned this in your opening post on this thread and I replied as follows:

In general your comments are well put, but in the interests of balance, I think its worth noting that the circa 50% tax hit on rental income applies only to the residual profit element after deduction of allowable costs and capital allowances, and not to the entire income received.

In the current environment, most first-time landlords will struggle to make any sort of decent profit, and as such they shouldn't have much of a tax bill if they organise themselves properly and claim all their deductions etc entitlements.

 

[RMCF]

Apologies, no its not meant as a windup.

My original post was a while back and I have heard and read so much info in the meantime that I have got slightly confused. Plus I was involved in a few PMs which added to my confusion. I did say that I am not so clued in on all this, so I appreciate your patience with any questions I ask.

You say that I would struggle to make any profit. But surely its not profit that you are taxed on, but your income you receive from renting. I understand that I can take off deductions but I will still end up with maybe €3.5k - €4k out of €6k that I will be liable to be taxed on, so surely to say I won't have much of a tax bill is slightly generous.

 

[T McGibney]

But surely its not profit that you are taxed on, but your income you receive from renting.

Sorry, and I don't really know how to say this, but why is it not logical to assume that you would be taxed on your profit?

In general terms, businesses are taxed on their profits, not their turnover.

 

[T McGibney]

I understand that I can take off deductions but I will still end up with maybe €3.5k - €4k out of €6k that I will be liable to be taxed on, so surely to say I won't have much of a tax bill is slightly generous.

Every case is different and depending on your own circumstances, you might end up with a higher liability than the average person in a similar position. That said, the only way to properly minimise your liabililty is to ensure that you claim all legitimate deductions. If you're not sure what these are, or not certain as to how the system works, the obvious route at that point is to get professional advice on minimising your liability.

 

[Bronte]

1) Pre-letting expenses not allowed?

- If true, does this mean that if I buy stuff now for the house to furnish it or provide white goods, or paint it, can I not claim for this? .

The furniture and fittings you buy will be allowed at 12.5%. The painting will not as it's a first letting and considered a pre letting expense. If you paint it a week after the tenant moves in then it is allowable. You need to look at revenue.ie for clarification on this. Some preletting expenses are allowed. Some are not. From memory, for preletting expenses allowed it's advertising and legal costs for drawing up a lease. But as I said look up the websites which clarify this.

If you renovated now this wouldn't be allowed, instead this capital expenditure would be allowed against capital gains when you sell. But best to forget about that now and concentrate on income tax.

In relation to profits. If your profit after expenses is 3.5K then you are to pay 41% of that in tax. This comes from your rent.

Have a look at Irishlandlord.ie and AAM under investment property so that you get a better grasp of what you can claim for.You have to understand that being a landlord is a business. As previous poster said the rent is your turnover but you're not taxed on this, you are taxed on your rent minus deductions to get your profit. Unlike other landlords starting out you are paying tax immediately due to the fact that your mortgage is low and the fact that rent is not your ownly income. If you decide that the returns on the property are not worth it then you may have to sell the property.

 

[RMCF]

Sorry, and I don't really know how to say this, but why is it not logical to assume that you would be taxed on your profit?

In general terms, businesses are taxed on their profits, not their turnover.

Again thanks for your replies.

Needless to say I will be getting professional advice. At least for Yr1 anyway. Its just all too confusing, and I don't want to get it wrong.

I hear what you are saying about being taxed on profits, but when reading up on rental income, I have often been told that all rental income is subject to tax, minus acceptable deductions of course. I guess this is basically taxing my profit I guess !

Thanks again.

 

[RMCF]

As I have most questions answered (for now), I would like to thank all those who replied to my questions on this thread, especially Bronte and T McGibney.

This site shows all that is good on internet forums. Plenty of valuable advice which is delivered quickly and free of charge. Thanks for taking the time and effort.

 

[oldnick]

You should put NPPR as a cost as I do.

I have received nor found (after much searching) any information from Revenue that it is not an allowable cost. Indeed, on the Revenue website there is a downloadable leaflet on rental income and one of the allowable costs is "Rates,levies or similar"..

Yes, I know there's an unofficial website that claim they asked Revenue who "indicated" it was not allowable because it wasn't specifically mentioned in the relevent leigislation covering allowable costs (but that legislation was written before NPPR was introduced !)

So, what's the worst that can happen if you put it down as a cost ?
Assuming Revenue actually checks your accounts you can quite justifibly argue that as far as Revenue's leaflet is concerned it indicates that it is allowable . All they can do is disallow it -they won't hang anyone !