Investment property - tax relief on renovations

camo

I am in the processing of inheriting a property in Dublin which my late uncle left to me. It is located in Dublin 8.

I intend to keep the property, renovate it (it's badly in need of) and rent it out. I will not be living in it myself.

For arguments sake I have to spend 100k on renovating it can I claim any tax relief? A friend of mine seems to think that I can claim tax relief on 12.5% the amount spent renovating it each year for 8 years? I.e. I subtract 12,500 from the annual rent when making a tax return. Is this the case? If not are there any other tax reliefs I could claim.

The_Conductor

Fixtures and fittings can be depreciated on a flatline basis.
However- renovations are a different kettle of fish.
Renovations to return the property to its original state- aka to remedy necessary repairs etc- may be deductible- however, renovations to improve the property (such as new windows, doors, rewiring, plumbing etc)- would not count.

That said- the announcement in the budget yesterday- of the extension of the home renovation scheme to investment properties- will be of interest to you. It affords you relief @ 13.5% of qualifying expenditure on repairs, renovations and improvement works. Its a one off 13.5% though- you don't get to write-off the entirety of the expenditure- as you were suggesting.

Revenue's explanation of the scheme is here: http://www.revenue.ie/en/tax/it/reliefs/hri/hri-general-faqs.html

Note- they will probably be updating this page in the next few days to reflect the scheme now also applies to investment properties........

sunnysoutheast

The_Conductor wrote: »

Fixtures and fittings can be depreciated on a flatline basis.
However- renovations are a different kettle of fish.
Renovations to return the property to its original state- aka to remedy necessary repairs etc- may be deductible- however, renovations to improve the property (such as new windows, doors, rewiring, plumbing etc)- would not count.

That said- the announcement in the budget yesterday- of the extension of the home renovation scheme to investment properties- will be of interest to you. It affords you relief @ 13.5% of qualifying expenditure on repairs, renovations and improvement works. Its a one off 13.5% though- you don't get to write-off the entirety of the expenditure- as you were suggesting.

Revenue's explanation of the scheme is here: http://www.revenue.ie/en/tax/it/reliefs/hri/hri-general-faqs.html

Note- they will probably be updating this page in the next few days to reflect the scheme now also applies to investment properties........

Bear in mind that a rewire/replumb may include items that can be depreciated, such as light fittings/radiators/boilers etc. There is no definitive list I have ever found on this but the working rule appears to be that if it can be removed without damage and reused somewhere else it counts as "fixtures and fittings". An example often quoted is carpets (yes) tiles (no).

I believe that capital improvements could be claimed against any capital gain but have no direct experience of same, and how that would interact with the scheme outlined above.

garhjw

sunnysoutheast wrote: »

Bear in mind that a rewire/replumb may include items that can be depreciated, such as light fittings/radiators/boilers etc. There is no definitive list I have ever found on this but the working rule appears to be that if it can be removed without damage and reused somewhere else it counts as "fixtures and fittings". An example often quoted is carpets (yes) tiles (no).

I believe that capital improvements could be claimed against any capital gain but have no direct experience of same, and how that would interact with the scheme outlined above.

Agreed on the rewiring/replumbing. I queried this with my accountant in the past as I had concerns about deductibles. He was able to provide documented evidence of revenue accepting such deductibles.

Unfortunately, I only have experience of capital losses the sat couple of years..

The_Conductor

You would be prudent to query this with Revenue- they have taken a much more hard-line approach on deductibles of late (over 2000 cases- not all in residential market- last year- and with the end of year returns coming up at the end of the month- its envisaged they will have a further crackdown........)

Query it- its better to be safe than sorry.......

camo

Thanks for the replies. So basically there's no clearly defined written guidelines. Seems a bit vague looking at Revenue.ie