Thomas McGibney & Company

Chartered Accountants

Tax on Rental Income - A Guide

How is Rental income Taxed? Allowable Expenses

Capital Allowances Example Rent Account

Rental Losses Self-Assessment

Tax Collection Rent a Room Relief

How is Rental income Taxed?

Rental Income is taxable under the Irish tax system. For most cases of rental income, the amount taxable can be calculated as follows:

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 (note the restrictions below)
	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

Mortgage Interest - Restrictions

	For periods from 7 April 2009 onwards, the deduction in respect of mortgage interest on a rented residential property is restricted to 75% of the total interest incurred.
	For the tax year 2006 onwards mortgage interest is only allowed as a deduction aganist rental income on a rented residential property if the landlord has complied with the requirement to register residential tenancies with the Private Residential Tenancies Board. For more details on this, see www.prtb.ie

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

Capital Allowances

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

heating, furniture, etc

The allowance is 12.5% per year, each year for 8 years.

Additional Capital Allowances are also available on 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 6,950

Rental Income 2,050

Wear and Tear Allowance

Furniture & Fittings

Cost 6,000 x 20% 1,200

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.

Self-Assessment Tax Collection

Generally, tax due on rental income is collected under the Self Assessment system. If in doubt, please refer to our Guide to Self-Assessment.

Rent a Room Relief

The Taxes Acts include 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 €10,000 in a calendar tax year.

	For the purposes of the €10,000 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 levies.
	Details of this income must be included on an individual’s annual income tax return.

Read our detailed analysis of the Rent A Room Scheme

Thomas McGibney & Company

Chartered Accountants

Phone +353 (0)49 8549966

email tax@mcgibney.com

Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in Ireland (ICAI). Chartered Accountants Ireland is the operating name of ICAI.