New bathroom tax deductible question

gebbel

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We paid €5000 putting in a new bathroom in a rental property last year. All the kit (tiles, bath, shower, sink etc) we ordered from the UK. A local tradesman did all the work. As I'm filling in a form 11 soon, is there sanything deductible here? Many thanks.
 

torblednam

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Is it a new bathroom i.e the addition of a bathroom that didn’t previously exist, or the replacement of a pre-existing bathroom?
 

Yoga Woga

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Can you deduct it if you do it 3 months before you move and subsequently rent out the house? We're gutting our bathroom at moment - and plan to rent out our home - the bathroom and works are being done with renting in mind.
 

Sarenco

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I don't see how replacing a bathroom could be considered "maintenance".

Surely it's an "enhancement" (and hence deductible from CGT, not income tax).
 

Yoga Woga

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From reading the various comments - I would have to agree with the income tax angle - as otherwise we'd be making do with a tatty bathroom - and to be honest it all needs to be replaced for functionality and any enhancement is purely secondary. Deduct over 8 years?
 

Sarenco

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Capital expenditure on property improvements is not deductibe in calculating rental profit.

Routine or recurring maintenance that simply brings a property back to its original condition, such as cleaning, painting and decorating, is clearly deductible.

Did the bathroom replacement improve or add value to the property? If it did, it seems to me that constitutes "capital expenditure" and is not deductibe in calculating rental profit.

But it is, of course, deductible in calculating a taxable capital gain.
 
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torblednam

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Capital expenditure on property improvements is not deductibe in calculating rental profit.

Routine or recurring maintenance that simply brings a property back to its original condition, such as cleaning, painting and decorating, is clearly deductible.

Did the bathroom replacement improve or add value to the property? If it did, it seems to me that constitutes "capital expenditure" and is not deductibe in calculating rental profit.

But it is, of course, deductible in calculating a taxable capital gain.
There’s always shades of grey here, but:

If the OP just replaced the sanitary ware, with other sanitary ware of similar spec, I’m sure you’d agree that’s not enhancement.

If they just replaced the tiling, ditto.

If they just repainted, ditto.

If they just replaced the shower, ditto.

All of them together....???
 

Sarenco

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Well, repairs are certainly deductible in calculating rental profit. A "repair" means the restoration of an asset to its original condition by replacing a subsidiary part of the whole asset. So, replacing broken tiles, mending a leaking toilet, shower door, etc.

But alterations, additions or improvements of a capital nature are not deductible.

Repainting would certainly be deductible as "maintenance".
 

torblednam

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Well, repairs are certainly deductible in calculating rental profit. A "repair" means the restoration of an asset to its original condition by replacing a subsidiary part of the whole asset. So, replacing broken tiles, mending a leaking toilet, shower door, etc.

But alterations, additions or improvements of a capital nature are not deductible.

Repainting would certainly be deductible as "maintenance".
And, given that the various items subject to replacement no longer exist and their state at time of replacement can’t be confirmed, other than by the owner, how do you think a Revenue official would be likely to view the claim...
 

Sarenco

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I think Revenue are likely to view the bathroom replacement as capital expenditure on a property improvement.

Demonstrating that it constitutes a "repair" or "maintenance" would seem challenging.
 

Yoga Woga

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In our case - we bought a second hand home. The main bathroom was very tatty. The most cost effective thing was to gut it. Every item needed to be replaced (16 years of age) From a yellowing bath, to some damaged tiles, a leaking shower (which got through the floor/ceiling below/plasterboard behind the tiles) a chipped sink basin. We have had to replace all the plasterboard due to damage from water and also from tile removal. I would say any revenue official has no interest in visiting our bathroom and yes sometimes everything does need to be replaced at once. If we were to do the work separately it would be daft and certainly from reading the thread I am certain our work similar to that of the OP is indeed maintenance; gutting it was the most logical and practical action. I will contact revenue during the week to confirm. [Bath, Shower, Sink, Toilet to match, Painting, Tiling and plasterboard as well as plumbing repairs when I damaged a hot water pipe while gutting the bathroom also window glass, hinge and handle had to be replaced - other option was using a pair of pliers to close the window and a hard pull to get it to shut due to a broken hinge - so yes all maintenance and no intention of trying to pull a fast one on revenue whatsoever - why should any of that be challenging when its the absolute reality and truth of the matter? )
 

cremeegg

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how do you think a Revenue official would be likely to view the claim...
We have a self-assessment system, so it is not, initially at least, a matter of any Revenue official's view.

There are 3 possibilities:

1. Repairs and separately maintenance, are allowable expenses which can be deducted from income in the year they are incurred. In my opinion painting would be a straightforward example, indeed it is specifically mentioned in the Revenue guidance. If painting is included here, then surely tiling is also, just an opinion.

2. Where a house is let as a furnished residence and the rental income is chargeable under Schedule D Case V, a wear and tear allowance can be claimed for capital expenditure on plant in the house under section 284(6) and (7) Taxes Consolidation Act 1997 (TCA).

See here

I suggest that new bathroom fittings would come under this heading.

This at 12.5% pa for 8 years. It is claimed as a capital allowance and not an expense in the profit computation.

3. Capital expenditure on the property itself, building an extension would seem a straightforward example, can neither be deducted as an expense nor a capital allowance, it can be added to the cost of the property as part of a CGT calculation when the property is sold.

Deciding which of the three headings the cost belongs in is the responsibility of the taxpayer. There is no reason why each individual item in the project should not be considered separately. It can be a matter of opinion and no Revenue official is likely to query and reasonable self assessment.

Personally I think the following from https://www.revenue.ie/en/property/rental-income/foreign-rental-income/what-expenses-and-deductions-are-allowed.aspx

You can claim capital allowances on the fitting out and furnishing of your rental property. The fixtures and furniture must belong to you and be in use at the end of each year that you claim for.

Suggests that the OP should look at the expenditure as, capital expenditure on the house, and deduct 12.5% as a wear and tear allowance, not an expense.
 

Fergal19

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Would the items not deemed to be repairs be classified as capital allowances and claimed over 8 years?
 

torblednam

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I think Revenue are likely to view the bathroom replacement as capital expenditure on a property improvement.

Demonstrating that it constitutes a "repair" or "maintenance" would seem challenging.
With respect that’s absurd.

If what’s there after the work is done, is relatively bog standard (pardon the pun) how can anyone form the view that it’s improvement of the property (in the specific context of improving beyond the original state / spec).

There’s a certain amount of case law in relation to this issue. One example cited is the replacement of old single glazed windows, with double glazing. Now that is clearly an improvement, but advancement in standard materials means that such a replacement would be accepted as a repair.

This would never happen in the real world but how this would theoretically play out is as follows:

- Joe Bloggs spends money as per the OP.
- For whatever reason, Revenue enquire about the rental deductions.
- Joe explains he had replaced the various bathroom fittings, tiling etc, and repainted and has paperwork evidencing the expenditure.
- Revenue official decides (based on nothing evidential) to classify some proportion as capital and disallow deduction for that part.
- Taxpayer appeals as they’re entitled to.
- Eventually, a couple of years later, the matter comes before a Tax Appeal Commissioner (a quite bemused one no doubt, given the relatively trivial amount involved).
- The taxpayer gives evidence that the old bathroom had become unsatisfactory from wear & tear, leaks, breakage, or whatever.
- Revenue has zero evidence to the contrary.
- Appeal Commissioner has to have regard to the taxpayers evidence and, even more bemused than they were at the outset, they find in the taxpayers favour.
 

Yoga Woga

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Hmmmm. I'm definitely asking Revenue for a suggestion on how to proceed - I have always found them most helpful over the years. My thoughts after reading the above re my own case and the OP - would be a combination of Expenses for maintenance and offsetting the balance at 12.5% each year for capital allowances - bath/shower etc - nothwithstanding their disrepair. The glass I have replaced in the window - is a higher spec - but as torblednam mentions - this is simply an advancement in material standards. Now where would a new front door 'enter' into all of this? or should I start my own thread?
 

Sarenco

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With respect that’s absurd.
You asked how I think a Revenue official would likely view a claim on the basis of the facts presented by the OP. You are obviously free to disagree but I don’t think it’s fair to describe my response as absurd. As you said yourself, this is a grey area.

The OP didn’t tell us that he replaced like-with-like or that there was anything wrong with the existing bathroom. You added all these details yourself.
 
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