Using AVC's to offset tax on Rental Income

LilyBlossom

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Is it the right thing to do to use all your rental income to buy avcs so you dont have to pay tax.

eg. My rental income is 12000k per year - I have to pay approx 6000k in tax this year (minus expenses)

If I put the 12 in to AVCS - I am not liable for tax at all on the income so it looks good but I am wondering if I am missing something

Any thoughts?
Thanks.
Lily
 
if you put 12000 into an AVC, at higher rate of tax you get relief of 4800 not 6000. So you would still owe the taxman 12000 euros.

You should view these as two separate transactions. You get relief into an AVC regardless of rental income or not. So don't fool yourself into thinking that you have "dodged" or "avoided" tax on rental income by paying into an AVC. You have instead, paid your tax on rental income and gotten a tax refund due to your AVC investment.
 
I think you can only claim tax relief on earned income, not rental income (but I could be wrong).
 
when you make an additional voluntary contribution (avc) to your pension you are entitled to a refund of income tax that you have previously paid.

When you earn rental invome you are obliged to pay tax on it

By making an avc of a specific amount that corrosponds to the tax you owe on rental income, you effectively, net off your tax due with your tax refund.

I sometimes hear people say...my accountabt advised me to make an avc thereby reducing my tax on rent to zero.
But thats a bit misleading i think. All you are doing is paying your rental income tax with the refund you wold otherwise have been due on your avc
 
Also, the maximum AVC you can get tax relief on, is dependent on your age and your earned income and how much you are already paying into your pension scheme
 
As everyone has already said, avc tax relief is a feature of the tax system. You get the relief when you contribute to your pension.

There is no silver bullet you have to pay tax on rental income.

You can "make believe" one is paying for the other but in reality they are independent transactions.
 
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