Rental Income tax offset against pension payment
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Brendan Burgess
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No.
Gordon Gekko
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No is the short answer.
But the reality is more nuanced and it’s a query that comes up pretty regularly.
Say I’ve €10,000 of taxable rental income and my salary is €100,000.
Ignoring PRSI, USC and preliminary tax, every October I’m going to have to pay income tax of €4,000 in respect of my rental income.
What I could do instead is make an Additional Voluntary Contribution (AVC) of €10,000 against my salary for the previous year.
That generates an income tax rebate of €4,000 against my salary, but which in practice nets off against the tax due on my rental income.
So it feels like I got the relief against the rental income. But that’s all it is, a feeling and a form of mental accounting.
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Paul O Mahoney
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Obviously one cannot do this if one has reached the limits of what you are allowed to put into your pension via AVC...
Her indoors has a bit of space from last year and I was hoping to do what you described above in the next return.
Gordon Gekko
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Obviously…which is why I specifically referenced the making of an AVC and someone on €100,000!
Marco 1972
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So you can offset rental income via an AVC then ? trying to figure it out...
Paul O Mahoney
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You set the AVC against normal paye and generate a tax credit? You pay your tax on the rental income in the normal way and in Gordon's example above they cancel each other out.
I'm assuming here as the Revenue only takes one amount as settlement for additional taxes those taxes are less by 4000 .
I think that's how it should work?