Revenue/Taxation Issue - Dublin Lettings

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Revenue/Taxation Issues

Gross Rental Income less Allowable Expenses less Capital Allowances equals Taxable Rental Income.

Allowable Expenses
The following are examples of the type of expenses that may be claimed for:

  • Water rates, Ground rent, Service charges, Waste Collection charges etc
  • Insurance costs
  • Management & rent collection costs
  • Advertising Costs
  • Legal fees relating to drawing up of leases or collection of unpaid rent
  • Accountancy fees relating to rental income
  • Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property.
  • Repairs, decorating and General Maintenance
  • Cleaning & related costs
  • Local Authority Property Registration Fees
  • Cost of any un-reimbursed services or goods provided to tenants by the landlord i.e. electricity, heating, etc

It is not generally possible to claim for the following expenses :

  • Pre-letting expenses, apart from auctioneer’s letting fees, advertising fees and associated legal fees
  • Capital expenditure, unless included in the paragraph below
  • Mortgage Interest paid prior to 1 January 2002 if the loan was taken out after 23/4/98, subject to technical transitional arrangements and certain changes in the Finance Act 2001

Capital Allowances
An allowance for Wear and Tear of furniture and fittings can be claimed in respect of all furnished properties. This normally will cover such items as carpets, electrical appliances, central heating, furniture, etc

From 1 January 2003 the allowance is 12.5%, per year, each year for 8 years. Prior to this, the allowance was 15% per year for the first 6 years and 10% in the year 7. An itemised list of capital expenditure should be attached to each year’s tax return so that the allowance can be calculated.
Additional Capital Allowances are also available in relation to certain Capital Expenditure on qualifying properties under the various incentive schemes (Urban Renewal, Rural Renewal etc.)

Example Rent Account
The following is a typical example of a Rental Income Computation

Gross rent 9,000
Less Allowable Expenses  
Letting Agent Fees 1,200
Allowable Interest 3,500
Repairs 1,100
Electricity/Heating 500
Accountancy Fees 250
Cleaning costs 400
Rental Income 2,050
Wear and Tear Allowance
Furniture & Fittings
Say Cost 6,000 x 20%
Taxable rental income €850

Rental Losses

If total allowable expenses exceed the rents received, the landlord incurs a rental loss for a particular tax year.
These losses may only be offset against other rental income.

It is not possible to offset such losses against other non-rental income sources (e.g. PAYE, business profits etc).
Unused losses can be carried forward for offset against future rental profits.

Rent a Room Relief

The 2001 Finance Act introduced a valuable tax relief for individuals who rent a room (or rooms) in their own home. Income from such “Rent a Room” arrangements is exempt from
tax, provided the gross rent received does not exceed €7,620 (IR€6,000) in a calendar tax year.

  • This relief applies from 6 April 2001 onwards.
  • For the purposes of the €7,620 annual limit, the gross rent figure includes all sums received by the landlord from the tenants – including food, etc where provided
  • Where a homeowner claims this tax relief, it will not affect their normal entitlement to mortgage interest relief.
  • Similarly, this relief does not affect the Capital Gains Tax exemption, which normally applies on the sale of a principal private residence.
  • The “Rent a Room” income is also exempt from both PRSI and the 2% Health Levy.
  • Details of this income must be included on an individual’s annual income tax return.