Rental Property - Tax Issue

N

Novic

Registered User
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21
Can somebody explain how rental income is taxed when there is a mortgage on a property. The mortgage is for a rental property. I have been told that all of the rental income can be written off against the mortgage interest and that any refurbishment cost can also be written off. Is this true? If so do I have to complete tax forms. I am also PAYE worker so normally my tax returns are completed by my employer. If I have no tax liability is it necessary to complete tax forms?
 
You can only write it off if you've registered with the PRTB. You still have to complete the tax forms. It's highly unlikely your rental income will exactly match all your allowable expenses. It may even be the case that you make a loss which you would then be able to carry forward against any gains in the future, but only if you file your returns.
 
Yes, I am registered with PRTB. Can you explain what the allowable expenses refer to.
 
Allowable expenses are

Interest element of the mortgage payment
Maintenance costs of the property
Depreciation of furniture purchased (usually spread over 8 years)

The revenue have published a leaflet, IT70, which is quite clear on this subject and explains how and when to file a return
 
Novic said:
I have been told that all of the rental income can be written off against the mortgage interest and that any refurbishment cost can also be written off. Is this true?
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It works the other way around - you write the mortgage interest & other expenses off against your income:
Rental income
Less:
mortgage interest
other expenses
capital allowances
= Net profit or loss

When did you incur the refurbishment costs - prior to first letting?
 
If you are purchasing a property as a long term investment (i.e. 10-20 years), you should consider structuring the purchase as tax-efficiently as possible.

Many investors see their investment property as a pension, but buy the property without thinking through the tax consequences:
  • Property you buy is more than likely purchased with funds that have suffered up to 46% income tax & levies.
  • Rental profits (rent minus costs) on the property are taxed at 46%.
  • You pay 20% CGT on any gains you make when you sell the property.
If you really want to deal with these tax leakages, consider buying the property (or other investment assets) through a pension:
  • No tax "handicap" on the money used to buy the asset, so twice as much money there for you to spend.
  • No tax on income or gains while your pension owns and sells the asset, everything rolls up tax free.
  • Up to 25% of the pension fund may be available to you tax-free when you access your fund at retirement.
All this is specifically approved by tax law and the Revenue Commissioners, so no compliance issues.

Tax is the biggest cost to building up your asset base and personal wealth. Before you buy any investment asset, consider the most efficient way to do it and always seek professional advice.
 
forgive me if i am on the wrong thread but is the VAT registration on short term rents still allowed? its years ago now but i bought a house to rent years ago, waived my exemption to VAt on short term lettings, got the vat back on the purchase price of the house and used that as the deposit to give to the bank. The rent you get includes the Vat you "charge" on the rent and u pay that over to the revenue every 2 months i think. When I sold the house i then repaid the o/s VAT to the revenue. The perfect way to speculate on the property market without a penny in your pocket!
 
Desperate D said:
forgive me if i am on the wrong thread but is the VAT registration on short term rents still allowed? The rent you get includes the Vat you "charge" on the rent and u pay that over to the revenue every 2 months i think.
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Desperate D - that as been abolished a couple years back.

Brings up a good question though.

Do you pay tax on the rent minus expenses or on the rent minus vat minus expenses?
 
You pay tax on the net income after vat

ie

Rental income 12100
less vat at 21% 2100

net after vat 10000

less mortgage int 4000


taxable = 6000
 
I spent 7000k last year on a rental property that i own.

3000 on a leaking ensuite that was damaging the ceiling. I got 2200 from the insurance.

Can I claim the difference of 800 as expenses.

The other 4000 was spent replacing the front windows and door which were draughty. Can I claim this 4000 against expenses?
 
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