Landlords are obliged to pay income tax on rental profits earned from property in Ireland or abroad.  The taxable profits are derived from a combination of rental income and allowable expenditure incurred in relation to the property.

This help-sheet gives a high level overview of general income and expenditure considerations; please contact us if you have any queries or comments.

Rental income

Rental income includes all income due to be paid during the year irrespective of when it was paid.  Generally you do not include deposits received.  However, deposits retained when a tenant leaves the property are counted as income.

Rental income can also include payments for right of way or the erection of signs or advertising hoardings on the property.

Rental expenditure

When calculating taxable income it is necessary to deduct allowable expenses from gross income.  These expenses can be ‘revenue’ or ‘capital’ in nature.

Revenue expenses

Revenue expenses are day-to-day expenses and include, per the tax legislation:

•         Rent paid
•         The cost of maintenance, repairs, insurance and management of the premises
•         Interest on borrowed money used for the purchase, improvement or repair of the property

Note re: interest

Where there is an obligation to register a tenancy with the Private Residential Tenancies Board (“PRTB”) no interest is allowed as an expense unless the registrations obligations are fulfilled.

In any case, for residential property only 75% of the interest, which would otherwise be allowed, is permitted as an expense.  This can often lead to a tax liability on a property which is not generating any income after interest and other expenses are paid.

Capital expenses

Expenditure on such assets as white goods, furniture etc. is considered to be capital expenditure.  The landlord is allowed to claim 12.5% of the cost, each year, for 8 years, as an expense against income.  As certain items will not last 8 years the remainder cost can be claimed in the year the items is discarded.  If it is sold for a profit there can be a claw back of allowances previously claimed.

How can Bainbridge Tax Consulting help?

• We assist clients to calculate accurately their income and expenditure from rental property.

• We work with our clients to try to identify every available expense to be claimed in order to keep tax liabilities to a minimum.

• We help them ensure that their compliance obligations are met in order to avoid punitive interest, penalties and potential publication in the event of a Revenue audit.

Please contact us if you have any queries regarding tax in relation to rental properties