Re: Rental income for ex-pat
Hi Glen,
As your home is situated in Ireland, you will be subject to Irish tax on any income you earn from it while abroad.
You can use the following Revenue Guide to Rental Income to calculate your rental income, for tax purposes, on the Dublin property
[broken link removed]
How this income is going to be taxed, based on the rules on Residence in the Irish tax laws, is a bit tricky but here is how I see it applying to you:
You are treated as tax-resident in Ireland in a tax year if (i) you spend 183 days or more here in that tax year, or (ii) if you spend a total of 280 days here in the combined period of that tax year and the previous tax year.
Depending on what time of year you left for Oz, you might or might not have been tax-resident in Ireland for the second tax-year of your stint down under.
e.g if you left, say, in March 1999, you would have been still tax-resident here for 1998/99 and for 1999/2000, as you would have spent more than 280 days here in the combined 2-year period.
Where all this theoretical stuff is leading to is that you are entitled to your personal tax credits for the tax years you are deemed to be tax-resident here (even when you are physically living outside the country) - so you should have full tax credits against your Irish rental income for the first 12-18 months you are away.
I enquired to the Tax Office about what happens your tax credits after that and they told me you are not entitled to any tax credit after you become "tax non-resident". However I think they are wrong and that as an Irish citizen you are entitled to part of your tax credits as follows:
Personal tax credits x A/B
where A= your total income taxable in Ireland
and B= total "world" income from all sources, including Irish income.
This could be worth fighting for, as a fair bit of money may be involved when you are away for a few years. The personal tax credit for 2002 is €1520 and a quarter of this would be worth €380 in a tax saving to you. Over three years this would exceed €1,000.
Re mortgage interest - You can deduct Mortgage interest paid from your rental income, if the mortgage you used to buy the property is still in place. It means that you can now add mortgage interest to the other expenses which you can deduct from your gross rental income when calculating your taxable rental income.
Another thing, you should sort this matter out as speedily as possible and bring your tax affairs up to date. Otherwise, if you get into the bad books with Revenue they can make things pretty unpleasant with tax surcharges, interest and penalty charges and the like.
From your posting, technically you seem to be already in arrears. Its obviously not easy to deal with it when you've been the other side of the world. You should consider getting someone here to talk formally to the Revenue on your behalf, both in trying to avoid or mitigate any penalties and also in sorting out the whole residence issues to make sure you can avail of all reliefs to which you are entitled.
If you want me to do this on a professional basis for you, click on the link below and drop me a line by email.
Tommy
www.mcgibney.com
