Renting an apartment to family member

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Millie*

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I understand that you must charge market rent if you are renting to a connected person.

Im trying to clarify what rent to declare and pay tax on when you rent to your family member below market value as follows :

For example-

Market rent is €16000
Less : gift each yr to family member 2x €3000 = €6000
= Net rent received by me = €10000.

Looking to double check this on here please-
As far as I understand I must declare and pay tax on the full €16000.

Is this the correct way to deal with it.

Thanks in advance
 
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Millie* said:
As far as I understand I must declare and pay tax on the full €16000.
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I don't think so. I think that you just pay income tax on what the family member actually pays you.

The rest is a gift to the family member which to the extent it is not covered by the annual tax free amount and the life time threshold, the family member has to declare and pay CAT on themselves.

That is my understanding, but I am open to correction.
 
Millie* said:
I understand that you must charge market rent if you are renting to a connected person.
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Says who?

You can set the rent at any level you like.

Revenue could technically argue that if you rent something to anyone for less than the market rent, you are giving them a gift of the difference.

But I doubt that Revenue would have any interest in that.

If you give a house rent-free to your adult children, they might well be interested.

But if you rent your house for €12,000 to your children, you pay tax on the rent received.
 
My understanding from memory is that an interest deduction is the only item that is restricted if less than market rate rate is paid by a tenant. I agree with the comments on the gift element of the rent not charged and this is subject to the €3K small gift exemption and threshold amounts.
 
My understanding is ok on the gift part.
Parents can jointly gift €6000 per year.

What Im not clear on is the accounting for the rent receivable and what the revenue guidance is on this.
Specifically - do I declare and pay tax on €10000 or €16000
 
My understanding is that you just pay income tax on the rent you actually receive.

The tenant then has to take care of CAT themselves, assuming that they have a liability there.

I also think (again open to correction) that a family tenancy like this at a below market rent does not have to be registered with the RTB.
 
Greenbook said:
My understanding is that you just pay income tax on the rent you actually receive.
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This is 100% correct. It's theoretically possible for a tax authority to say you ought to have received a certain amount and you owe tax on that notional amount, but the existing income tax law in Ireland doesn't work that way.

In some countries, there is a tax assessed on hypothetical income from property. But not in Ireland. That type of tax might be put in place, for example, to deter property investment and holiday home acquisitions. Ireland arguably could or should bring in a tax to that effect, to stop properties being left idle. But instead Ireland has a vacant property tax and LPT.

Leaving a property idle or allowing someone to live in it rent free has the same outcome for income tax: no tax is due if no rent is received.

Greenbook said:
The rest is a gift to the family member which to the extent it is not covered by the annual tax free amount and the life time threshold, the family member has to declare and pay CAT on themselves.
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Yes, the tax risk lies with the beneficiary of the gift, and that risk concerns CAT.
 
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