Tax relief for "property investment"

Siamsa Sessions

Hi all,

My partner owns a house. It's rented out. The mortgage is €706 per month. The rental income is €600.

We make up the difference to pay the mortgage. We also add in some extra cash into the 'house account' every month, to cover repairs, paint, etc.

The house is in negative equity to the tune of around €60k.

This was our family home, but the family expanded and we moved.

Since we're now essentially investing in this "property asset", is there any tax relief available for the money we're pumping into it? Is there any chance this might be viewed as something similar to a pension investment?

Any advice would be most welcome.

Thanks.

godtabh

Siamsa Sessions wrote: »

Hi all,

My partner owns a house. It's rented out. The mortgage is €706 per month. The rental income is €600.

We make up the difference to pay the mortgage. We also add in some extra cash into the 'house account' every month, to cover repairs, paint, etc.

The house is in negative equity to the tune of around €60k.

This was our family home, but the family expanded and we moved.

Since we're now essentially investing in this "property asset", is there any tax relief available for the money we're pumping into it? Is there any chance this might be viewed as something similar to a pension investment?

Any advice would be most welcome.

Thanks.

You can claim 75% of the interest on mortgage as an expense. Other expenses can also be claimed. No tax relief.

The_Morrigan

The only advice you need is to visit a tax advisor and have them show you how to do a proper tax return dealing with allowable expenses.

NIMAN

No tax relief as such, but as a LL you can add on everything you spend on the house annually into 'expenses' and claim on your tax return.

But not everything is tax deductible. Major items like fridge freezers etc can be claimed back over 8yrs if I remember correctly, meaning you can only claim back the total cost/8 each tax year.

Check out www.irishlandlord.com (no affiliation) for more info, or best to see a tax advisor as others have pointed out.

Siamsa Sessions

Thanks for the replies folks.

Becoming landlords is a recent development for us, and it's been a steep enough learning curve.

But it's that or else try to crystalise the €60k loss, so we're learning fast

antoinolachtnai

You need to look at your tax situation. In addition to your top-up to pay the mortgage, you may still have an income tax liability. It is worth looking at

http://www.revenue.ie/en/tax/it/leaflets/it70.html

And if you are uncertain, it is worth getting advice.

NIMAN

Siamsa Sessions wrote: »

Thanks for the replies folks.

Becoming landlords is a recent development for us, and it's been a steep enough learning curve.

But it's that or else try to crystalise the €60k loss, so we're learning fast

Good luck with it.
I too was a reluctant LL, it wasn't really for me and eventually sold the house after renting it for about 18 months - 2yrs.

The tax I paid on it wasn't as high as I expected it to be, so don't be too scared, but definitely speak to an advisor and they should be able to give you a rough idea of how much it's going to cost you in tax each year.

Don't forget to keep every receipt.

Gumbo

NIMAN wrote: »

And, not saying you should do this, but things you buy for your own house or services paid for like boiler service etc, could be written off against your rental property!

I dont think thats true at all.
The receipt must state the MPRN number and the RGI number of the gas installer/service person.

Then god forbid something went wrong in your own home after the service and you try prove that your boiler was serviced and not the rental properties boiler which you have the receipt for.

The_Morrigan

NIMAN wrote: »

...........
And, not saying you should do this, but things you buy for your own house or services paid for like boiler service etc, could be written off against your rental property!

The very fact that you typed it up, means you are saying it. Seriously don't give advice to people that could get them into hot water with Revenue.

NIMAN

Fair do's, post amended. Others may have to now, as my comment is still visible in their replies.

Barely Hedged

NIMAN wrote: »

No tax relief as such, but as a LL you can add on everything you spend on the house annually into 'expenses' and claim on your tax return

What? 75% of interest payable on loans against the property is tax deductible.

Not everything you spend on the house is tax deductible. The spend could be during periods of non occupancy.

OP. The Revenue website is excellent and your tax obligations are on such a small scale that this link provides all the information. Do the little leg work required and avoid the expense of a tax accountant.

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section4

NIMAN

Barely Hedged wrote: »

What? 75% of interest payable on loans against the property is tax deductible.

Not everything you spend on the house is tax deductible. The spend could be during periods of non occupancy.

OP. The Revenue website is excellent and your tax obligations are on such a small scale that this link provides all the information. Do the little leg work required and avoid the expense of a tax accountant.

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section4

Correct.

hfallada

Barely Hedged wrote: »

What? 75% of interest payable on loans against the property is tax deductible.

I know, thats why most LLs are pissed about the whole "LLs have it easy and get special treatment from the Government". Any other business gets to write off 100% of their loan interest against their tax liability.

OP basically anything that can be justified for the business is a tax deductible expense. Eg cleaning products, bank fees for the rent. An accountant will probably only cost you about €200 to fee the tax return. Phone around as some can vary greatly in price. But an accountant will notice expenses you never thought about

Barely Hedged

NIMAN wrote: »

Correct.

Sorry, I wasn't questioning that it exists I was questioning that you said there were no tax deductions. That is a tax deduction...

NIMAN

The statement was more aimed at the money they were pumping into it, i.e. I was talking about the OP having to make up the shortfall in mortgage etc. Revenue don't care if the house isn'r returning a profit or you have to add money, they just seen what you are receiving in rental income, add this on to your other income, and tax you on the total amount (minus tax deductible things off course).

"Since we're now essentially investing in this "property asset", is there any tax relief available for the money we're pumping into it? Is there any chance this might be viewed as something similar to a pension investment?"

Barely Hedged

NIMAN wrote: »

The statement was more aimed at the money they were pumping into it, i.e. I was talking about the OP having to make up the shortfall in mortgage etc. Revenue don't care if the house isn'r returning a profit or you have to add money, they just seen what you are receiving in rental income, add this on to your other income, and tax you on the total amount (minus tax deductible things off course).

"Since we're now essentially investing in this "property asset", is there any tax relief available for the money we're pumping into it? Is there any chance this might be viewed as something similar to a pension investment?"

Ahh ok. I was taking the cash outflow perspective

murphaph

Between letting expenses are allowed. It's only pre letting expenses that are not.

NIMAN

Yeah, for example if you fully redecorate the house, paint every wall to make it nice for renting, not tax deductible.

Do it after your tenant is in, and it is deductible.

Silly and a lot more awkward I know, but hey thats the rules!

filbert the fox

Siamsa Sessions wrote: »

Hi all,

My partner owns a house. It's rented out. The mortgage is €706 per month. The rental income is €600.

We make up the difference to pay the mortgage. We also add in some extra cash into the 'house account' every month, to cover repairs, paint, etc.

The house is in negative equity to the tune of around €60k.

This was our family home, but the family expanded and we moved.

Since we're now essentially investing in this "property asset", is there any tax relief available for the money we're pumping into it? Is there any chance this might be viewed as something similar to a pension investment?

Any advice would be most welcome.

Thanks.

Welcome to hell!

Revenue treat Rental Income as non earned income. Therefore you have to pay tax on all of the rent (less certain deductions) at your marginal rate.

unfortunately landlords have been hammered recently with Household charge, PRTB charges, NPPR fees, Property tax, and apparately the PRTB charge is the only one you can deduct from your tax.
In addition, you can only deduct three quarters of the interest paid on loans for the property .

very basic calculation:

Rent €7200
insurance 350
Depreciation on fixtures 1450
Interest (2000 - 500) 1500
Prtb 90

deduct €3390

---

Net income 3810

taxable at your marginal rate say 40% +Prsi.......etc
Maybe €2000.


Shocking isn't it? :mad:

antoinolachtnai

If you redecorate pre-letting you may be able to allow that against capital gains tax when you eventually go to sell the property, or (more likely) you may be able to carry the loss forward. Advice needed and hang on to all the receipts.

sunnysoutheast

filbert the fox wrote: »

Welcome to hell!

Revenue treat Rental Income as non earned income. Therefore you have to pay tax on all of the rent (less certain deductions) at your marginal rate.

unfortunately landlords have been hammered recently with Household charge, PRTB charges, NPPR fees, Property tax, and apparately the PRTB charge is the only one you can deduct from your tax.
In addition, you can only deduct three quarters of the interest paid on loans for the property .

very basic calculation:

Rent €7200
insurance 350
Depreciation on fixtures 1450
Interest (2000 - 500) 1500
Prtb 90

deduct €3390

---

Net income 3810

taxable at your marginal rate say 40% +Prsi.......etc
Maybe €2000.


Shocking isn't it? :mad:

It's actually worse than that.

USC is charged on the gross minus allowable expenses.
IC and PRSI are charged on gross minus allowable exp. minus capital allowances ("wear and tear").

Disclaimer - this was the case for our 2013 return at least. I don't think it's changed. No longer a landlord thank God.

You are correct in that LPT (and the predecessors) are not deductible.

sunnysoutheast

antoinolachtnai wrote: »

If you redecorate pre-letting you may be able to allow that against capital gains tax when you eventually go to sell the property, or (more likely) you may be able to carry the loss forward. Advice needed and hang on to all the receipts.

Capital improvements (e.g. better windows, new roof) are allowable against capital gains on disposal. I think you could be right about pre-letting expenses if they increase the value but not 100% sure.

Repairs or like-for-like replacements are claimable as expenses in full when incurred.

Losses from rental activity can be carried forward to subsequent years, given that rents are on the up this may now be a valuable break for some landlords.

The_Conductor

Barely Hedged wrote: »

What? 75% of interest payable on loans against the property is tax deductible.

Just to clarify- it is an allowable cost before determination of taxable income- it is *not* tax deductible. Its actually a big difference........