Tax on Income from Rented House

randombar

Hi All,

Trying to help out the mother on her tax bill on a rental property she has.

So far the following can be written off against the rental income:

• Allowable Interest
• Repairs
• Insurance
• Bank Account Maintenance
• Property Tax
• PRTB
• Life Assurance
• Plumber - Boiler Service
• Garden Maintenance
• Annual Depreciation of Assets

I'm just wondering is there anything else that I can add to the list?

Also she got some work done on the property last year that is greater than the rental income on the house.

Can we spread the amount spent on the work over two tax bill years?

e.g. if the rental income is 10k per year and the work carried out is 20k can we write off 10k of the work in one year and 10k in the next?

Also I've only started to look into this now, I've to go back and check on what tax they were paying on the property income for the years previous (I think they were only discounting the mortgage interest and PRTB). Can I go back and update the accounts to say they overpaid in 2014 or something?

exaisle

Best advice i can give is to engage the services of an accountant. (Accountants fees are an allowable deduction against rental income).

athtrasna

exaisle wrote: »

Best advice i can give is to engage the services of an accountant. (Accountants fees are an allowable deduction against rental income).

+1. Well worth the money

Property tax is not a deductible either

Henry Ford III

Life assurance isn't deductible either.

barneystinson

Henry Ford III wrote: »

Life assurance isn't deductible either.

Certain mortgage protection policies are:
http://www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-04/04-08-09.pdf

4ensic15

GaryCocs wrote: »

Hi All,



e.g. if the rental income is 10k per year and the work carried out is 20k can we write off 10k of the work in one year and 10k in the next?

. Can I go back and update the accounts to say they overpaid in 2014 or something?

It is unlikely that 20k was spent on repairs. Only repairs are allowed against current income. capital expenditure such as an improvement is not allowed against current income.

Gumbo

I think there's one or two things wrong on your list.

Interest is only allowable up to 75% for example.

Best bet for the first return is to pay a professional. Should only cost a couple of hundred euro and their bill is 100% allowable!

The_Conductor

4ensic15 wrote: »

It is unlikely that 20k was spent on repairs. Only repairs are allowed against current income. capital expenditure such as an improvement is not allowed against current income.

Also- you can't carry forward- or backdate repair costs- it is only allowable against income in the year in which it occurs. Aka- you can't split the one bill over 2 years.

This is one of the reasons why you get a lot of work done as two stage jobs in Nov/Dec and Jan/Feb- to split the bill for it over two financial years.......

marymary1984

How likely is this be be examined. For example if you did split the repair over two years, how likely is it they would find out. Has anyone been or know of anyone audited?i'd be a fan of doing it right so I can sleep at night but just wondering what are the chances of being caught?
Also, think estate agent fees to get it rented or anything directly relating to the property are allowable (assuming estate agent was required for the financial year).

athtrasna

marymary1984 wrote: »

How likely is this be be examined. For example if you did split the repair over two years, how likely is it they would find out. Has anyone been or know of anyone audited?i'd be a fan of doing it right so I can sleep at night but just wondering what are the chances of being caught?
Also, think estate agent fees to get it rented or anything directly relating to the property are allowable (assuming estate agent was required for the financial year).

Receipts need to be submitted, well our accountant always did and we got them back from Revenue after a few months

Sleeper12

marymary1984 wrote:

How likely is this be be examined. For example if you did split the repair over two years, how likely is it they would find out. Has anyone been or know of anyone audited?i'd be a fan of doing it right so I can sleep at night but just wondering what are the chances of being caught? Also, think estate agent fees to get it rented or anything directly relating to the property are allowable (assuming estate agent was required for the financial year).

I have 5 brothers and sisters with rental property. So far 3 have had tax inspections in the last seven years.

The_Conductor

athtrasna wrote: »

Receipts need to be submitted, well our accountant always did and we got them back from Revenue after a few months

Ditto. And you are expected to keep the receipts for 5 years- if you're audited (which is a lot more common with landlords these days)- you have to be in a position to go back 5 years and defend your returns.

barneystinson

marymary1984 wrote: »

How likely is this be be examined. For example if you did split the repair over two years, how likely is it they would find out. Has anyone been or know of anyone audited?i'd be a fan of doing it right so I can sleep at night but just wondering what are the chances of being caught?
Also, think estate agent fees to get it rented or anything directly relating to the property are allowable (assuming estate agent was required for the financial year).

You're a lot more likely to be audited because of the incorrect claim, as Revenue select cases for audit based on risk - paying feck all tax on a rental property over a couple of years because of relatively very high expenses would be a clear risk indicator.

barneystinson

athtrasna wrote: »

Receipts need to be submitted, well our accountant always did and we got them back from Revenue after a few months

Receipts don't need to be submitted with returns, what'd be the point of electronic filing of returns if that was the case. If Revenue want to see receipts they ask for them.

athtrasna

barneystinson wrote: »

Receipts don't need to be submitted with returns, what'd be the point of electronic filing of returns if that was the case. If Revenue want to see receipts they ask for them.

It's two years since we filed our last lot (no longer landlords thankfully) but accountant always sent receipts as a supplementary filing somehow. Meant we were up front from the start. Problem with a lot of receipts is that they don't last very long, combination of that shiny paper and cheap ink.

c montgomery

athtrasna wrote: »

It's two years since we filed our last lot (no longer landlords thankfully) but accountant always sent receipts as a supplementary filing somehow. Meant we were up front from the start. Problem with a lot of receipts is that they don't last very long, combination of that shiny paper and cheap ink.

Scan all receipts to pdf immediately.
Electronic copy will last forever and easier to look after

4ensic15

The_Conductor wrote: »

Also- you can't carry forward- or backdate repair costs- it is only allowable against income in the year in which it occurs. Aka- you can't split the one bill over 2 years.

This is one of the reasons why you get a lot of work done as two stage jobs in Nov/Dec and Jan/Feb- to split the bill for it over two financial years.......

You can have a loss forward. Very common in the old days of 100% interest relief. Repairs over 12.5% of rent will attract attention however.

Mrs OBumble

athtrasna wrote: »

It's two years since we filed our last lot (no longer landlords thankfully) but accountant always sent receipts as a supplementary filing somehow. Meant we were up front from the start. Problem with a lot of receipts is that they don't last very long, combination of that shiny paper and cheap ink.

Nice little earner for the accountant to be able to bill you for the time spent doing that.

Revenue's forms explicitly say to keep receipts, but not to send them.



OP, IMHO it's not worth trying to cheat on tax, ever. They'll catch you sooner or later. Or if they don't, you'll be forever worried that they're going to. Accountant suggestion is sound, but you do need to keep an eye on what they're doing, still.

dreamerb

GaryCocs wrote: »

Also she got some work done on the property last year that is greater than the rental income on the house.

Can we spread the amount spent on the work over two tax bill years?

e.g. if the rental income is 10k per year and the work carried out is 20k can we write off 10k of the work in one year and 10k in the next?

I think this one depends on the circumstances.

If they're between-rental or during-rental repairs that are not of a capital improvement nature, they give rise to a rental loss in that year, which can be carried forward against future rental income until exhausted.

If they're replacements of furniture, for example, they can be written off over 8 years at 12.5% a year.

Capital improvement is complex: consult a professional.

That's a slightly simplistic version - even if carried-forward losses "eliminate" rental profit in subsequent years, there's still a liability for ?USC?

Revenue can be very helpful if you strike it lucky, but it might be worth preparing preliminary accounts yourself and taking professional advice on issues you have questions about. It shouldn't cost much, and although it won't stop Revenue auditing, it's some limited defence against punitive penalties if Revenue ultimately decide there was a higher liability.

exaisle

IMHO some of the replies on this thread are incorrect and indeed, some are downright dangerous.
It's clear that some posters are not professionals in this field.
I'm not going to go into details but I will simply refer the OP to post #2.
He clearly requires the services of an accountant/tax consultant.

The_Conductor

exaisle is right- whatever a tax consultant costs- its money well spent- and even if you only employ the services of a tax consultant in year 1- you have a template you can then use going forwards.

Lockedout2

The repairs figures is separately disclosed on the form 11 so it's very clear when you compare the number of properties, the rent and the repairs whether it right or not.

For Revenue it's very easy to audit landlords they just write you a letter and ask for the back up for the expenses and inform you of your rights to make a disclosure.

Rent of €10,000 and repairs of €20,000 on one property is high risk.

Rental is 3rd in Revenues list of audits.
See table 18 http://www.revenue.ie/en/about/publications/annual-reports/2015/tables-strategy2.html#table15

SarahMollie

One point to make on any work done to the house. As other have said, its its an improvement rather than a repair, then you can't write it off, but the Home Renovation Incentive should allow you to claim back the VAT.

Your mother really needs an accountant. Unless you're very knowledgeable in this area, its a false economy not having one.

Choc Chip

OP, just to note, you can't claim depreciation either (you can claim capital allowances). I'd advise speaking to a qualified tax advisor (though a lot of small accountants might have enough experience to sort it out for you).

L1011

athtrasna wrote: »

combination of that shiny paper and cheap ink.

Its not ink, its a heat activated dye in the paper. That's why it fades away

Put a shiney receipt under a (metal) teapot and it'll go entirely black.

Ink printed receipts - matt paper, usually blue print - should last forever. However its still a good idea to scan the lot!

randombar

Thanks for all the advice guys.

So my mother initially went with an accountant but I'm disappointed with the results so far. She never included depreciation which would save my mother a decent bit year on year. So I'm figuring if she didn't include that what else is she forgetting about.

We're actually having problems at the moment getting the builder to provide the receipts for last year's work. Going on a few months now etc.

sunnyday1234

filing a tax return on rental income is so basic that paying an accountant to do it is a complete waste of money. It really is very simple

Humour Me

Depreciation is not an allowable expense - are you thinking of Capital Allowances?

Gumbo

GaryCocs wrote: »

Thanks for all the advice guys.

So my mother initially went with an accountant but I'm disappointed with the results so far. She never included depreciation which would save my mother a decent bit year on year. So I'm figuring if she didn't include that what else is she forgetting about.

We're actually having problems at the moment getting the builder to provide the receipts for last year's work. Going on a few months now etc.

Depreciation is not allowed. Your accountant was correct not you

4ensic15

sunnyday1234 wrote: »

filing a tax return on rental income is so basic that paying an accountant to do it is a complete waste of money. It really is very simple

It is not very simple. It is easy to slip up.

randombar

Not depreciation sorry Capital Allowances.

• Boiler
• Fridge
• Washing Machine
• Dryer
• Dishwasher
• Table and chairs
• Television
• Settee and chairs
• 4 beds
• 4 mattresses
• 4 bedside lockers
• Wardrobe
• Chest of drawers
• Vacuum Cleaner
• Microwave/Kettle/Toaster
• Electric showers
• Oven & Hob
• Kitchen and bedroom built-ins

Not trying to fiddle anything don't worry would never risk it, I just want to make sure my mother pays the minimum fair amount.

Repairs were the replacement of two bathrooms because of broken tiles and a leak and well as replacement of a broken sliding door at the back.

Trying to get a receipt from the builder for the work for the past four months, avoiding calls and texts now at this stage.

The accountant might be worth it all right if the cost is written off but it's finding one that knows all the write offs (didn't have their own fees in it or Capital Allowances)