Rental income split between spouses

K

Kev1964

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As part of our retirement income planning my wife and I are planning to let out a jointly owned apartment and hoping to generate an annual gross rental income after expenses of €20k. This is planned to happen in tax year 2026.

Our question is whether we are allowed to allocate this income between us in whatever ratio we like eg 90/10, 80/20, etc. or are we obliged to have 50/50? The context of asking is that I wish to avoid the rental income for me exceeding €7500 as this may affect my eligibility for the Over 65 social welfare payment.

Thanks in advance.
 
Our accountants told us 50:50 - no other way around it and our taxes have included 50% of the rental income each for the last few years.
 
lougre said:
Our accountants told us 50:50 - no other way around it and our taxes have included 50% of the rental income each for the last few years.
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Thanks for sharing your experience.

I wonder what a tax advisor would say? Accountancy is a different discipline and I’ve heard of them being wrong before.

I can’t see direction from Revenue in this section…..

Irish rental income

This page gives a general idea on how Irish rental income is taxed
www.revenue.ie
 
Spouses are allowed to transfer assets between them as they see fit.

I always assumed that the tax shares would follow the ownership shares.

Kev1964 said:
this may affect my eligibility for the Over 65 social welfare payment.
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Are you talking about a non-contributory state pension?
 
Dr Strangelove said:
Spouses are allowed to transfer assets between them as they see fit.

I always assumed that the tax shares would follow the ownership shares.


Are you talking about a non-contributory state pension?
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No. The Over 65 social welfare payment that you can qualify for at age 65. Paid at same level as JSB.

Benefit Payment for 65 Year Olds

Benefit Payment for 65 Year Olds is for those aged 65 who have stopped work or self-employment who satisfy the PRSI conditions. It may be paid from your 65th birthday until your 66th birthday.
www.gov.ie
 
It follows the ownership percentages, but if there’s no debt and the amounts at stake are material, you could change those percentages reasonably easily.

@torblednam, unless there’s a risk that doing so might fall foul of Section 811 General Anti Avoidance
 
Dr Strangelove said:
What criterion are you worried might be affected here?
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Subsidiary income over €7500 which unless I cease letting the property by my 65th birthday may disqualify me from the over 65 benefit payment. In case anyone thinks I sound like I'm well informed on this topic, I'm not. I'm just feeling my way through retirement income planning and trying to avoid pitfalls while optimizing opportunities.

Like a lot of people using this forum I'm guessing...
 
This would probably not be a case of tax avoidance.

It is a case of trying to split incomes to maximise entitlement to a Social Protection Benefit.

The split incomes would still be taxed according to the total earnings of the married couple.

If the poster was successful in gaining BP65 the earnings and total tax liabilities of the couple would actually increase.
 
I was a paye earner and retired at 65 with rental income in excess of 7500 and received the over 65 benefit until I reached 66.Our rental income was shared 50/50

Partner was self employed and was refused it due to rental income although we could show that this was subsidiary to his main employment but apparently due to receiving in excess of 7500 euro rental he was refused.
 
Kev1964 said:
Subsidiary income over €7500 which unless I cease letting the property by my 65th birthday may disqualify me from the over 65 benefit payment.
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Ah I see it’s in the operational guidelines where income of €7,500 from employment or self employment disqualifies you from the payment.

It’s not clear whether rental income constitutes self employment.

Maybe someone has experience on this.
 
Meath Lady said:
I was a paye earner and retired at 65 with rental income in excess of 7500 and received the over 65 benefit until I reached 66.Our rental income was shared 50/50
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If you ceased employment immediately before claiming BP65, you would have meet the criteria for subsidiary employment and be allowed earnings over 7500 euro.
 
Thanks for sharing your experience.

So in hindsight do you think you should have split the rental income between ye differently so that his share was < €7500?
 
@Kev1964

I’d you don’t get answers here you might query DSP directly. Judging by your username you have a few years to go.

In my (limited) experience they are better at clarifying their criteria than Revenue.
 
Does it matter which spouse declares the rental income if jointly assessed?. Although jointly owned we normally just do one tax return with all rental income going in under my name.
 
Laughahalla said:
Does it matter which spouse declares the rental income if jointly assessed?. Although jointly owned we normally just do one tax return with all rental income going in under my name.
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It would matter if one of the spouse was taxed at lower rate per cent and the other at the higher rate.
 
Two rentals, due to vagueness and poor layout on Form 12 I allocate the higher rental income to my spouse on the lower income (20%) and the lower rental to myself as the higher tax payer. Done this last three years and no questions raised by Revenue
 
Kev1964 said:
Thanks for sharing your experience.

So in hindsight do you think you should have split the rental income between ye differently so that his share was < €7500?
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Kev@64
I honestly don't know as it was always split 50%50 and even citizens advice could not understand the refusal until they read the finer print.
 
The following requires legal and tax accountant scrutiny maybe there is someone who knows more about it.

It would appear that setting up a Deed / Declaration of Trust defining Beneficial Ownership vs Legal Ownership. I.e. Legal ownership refers to the name on the title of the property, while beneficial ownership refers to the person who actually benefit from the property (for example, by receiving income).

Revenue typically taxes the beneficial owner of income rather than the legal owner. If two people legally own a property but one person is the sole beneficiary of the rental income (through a legally binding agreement such as a deed of trust), the income can be taxed in the name of the beneficial owner.

It seems relatively straight forward however there are risks for the Legal owner that would need to be addressed and CGT issues.

From research it seems possible in the UK which normally has the same laws as Ireland - does anyone know if this will work in Ireland?

TSEM9520 - Ownership and income tax: express trusts - written declaration - HMRC internal manual - GOV.UK

www.gov.uk
 
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