# Claimable tax expenses on rental property



## Broderick (26 May 2019)

Good afternoon,

Hope you can help me! 

I have rented my home to a HAP family and need to carry out repairs and improvements to the house.  I want to add a bathroom to the main bedroom. There is currently one bathroom in the house which was sufficient when I lived at the house, now with seven people living in the house, a second bathroom is needed. 

In addition the existing bathroom needs to be upgraded. There is a build-up of condensation on the walls and ceiling causing damp patches, water is running down the side of the bath into the living room below.  I want to replace the bath with a shower unit, tank the walls to prevent water running into the sitting room. Add warm board to the external wall to prevent damp. Put in an extractor fan. Replace wall and floor tiles.

I have been given a quote of €8,400 for the repairs and upgrade. I am considering borrowing the money. 

Q. 1. Am I right in thinking that the interest on the loan to carry out repairs and upgrade can be offset against my tax liability?

Q. 2. Is it the case that only repairs, can be claimed as expenses for the year in which they are undertaken and that costs for new ensuite bathroom and existing bathroom upgrade must be claimed as capital allowances over an 8 year period @ 12.5% each year?

I really appreciate your help and look forward to your response.


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## Feemar5 (27 May 2019)

According to revenue you can claim tax relief for a mortgage to improve your property.    I don't know if just borrowing a small amount of money would be considered a mortgage.    See revenue site for other expenses.






						What expenses are allowed?
					

This page outlines the expenses you can deduct from your taxable rental income




					www.revenue.ie


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## Broderick (27 May 2019)

Thanks for your response - much appreciated!

I am looking at extending my existing mortgage to cover the costs for repairs and improvements.

Would this meet the criteria, I wonder?


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## Sarenco (27 May 2019)

Broderick said:


> I am looking at extending my existing mortgage to cover the costs for repairs and improvements.
> 
> Would this meet the criteria, I wonder?


Don't see why not.


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## Feemar5 (27 May 2019)

If the mortgage is on that property I don't see any problem but I don't think you could add to the  mortgage on your PPR - maybe check with revenue.


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## Broderick (27 May 2019)

Big thanks for responses - much appreciated!

The mortgage is on that property.


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## Bronte (28 May 2019)

I consider the work you're planning to be a repair/replacement. As such it can be claimed in one go in you tax returns.


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## RedOnion (28 May 2019)

Bronte said:


> I consider the work you're planning to be a repair/replacement. As such it can be claimed in one go in you tax returns.


Addition of a new bathroom is a repair / replacement?!


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## Thirsty (28 May 2019)

To the best of my knowledge, as far as tax offset is concerned, the property where the loan is secured does not have to be the rental property;  the question is what was the loan used for.


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## Gordon Gekko (28 May 2019)

The position is as follows:

- Interest on borrowings used to fund the installation of the new bathroom would be fully deductible against rental income

- The cost of the new bathroom would be deductible for CGT purposes when selling the property


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## Sarenco (28 May 2019)

@Gordon Gekko 

As a matter of curiosity, would you treat the upgrades to the existing bathroom as a repair or an enhancement for tax purposes?


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## Bronte (29 May 2019)

RedOnion said:


> Addition of a new bathroom is a repair / replacement?!


No I was referring to the the existing bathroom only.


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## Gordon Gekko (29 May 2019)

Hi Sarenco,

I’d look at what’s actually happening to be honest.

If I’m replacing the sink, loo, bath plus shower and retiling etc, I’d apply enhancement/CGT treatment.

But, I guess repairs are repairs.

It’s really just about looking at what’s happening and the ordinary meaning of the words.

Gordon


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## Sarenco (29 May 2019)

Thanks Gordon.

The works/upgrades to the existing bathroom as described by the OP don't strike me as repairs - they very much look like enhancements to me.


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## Gordon Gekko (29 May 2019)

I agree 100%. I’d be treating them as a CGT enhancement cost.


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## Broderick (29 May 2019)

Thanks for all your comments!

The thing is the existing bathroom needs to be upgraded. There is a build-up of condensation on the walls and ceiling causing damp patches, water is running down the side of the bath into the living room below. To do the work, either the existing bath needs to be taken out and the wall tanked around it and the bath replaced and the wall tiles replaced or I have a new shower unit installed, which might be cheaper in the long run.  My thinking is if I get a new shower unit, I will also need new wash basin and loo, otherwise the color won't match, the bath is cream. Floor tiles will need to be replaced if I am changing the loo and wash basin. The exterior wall needs to be warm boarded to prevent damp, which means it will need to be re-tiled.  

If I can't claim for the whole lot in one go, can I claim for repairs this year and over 8 years for the rest?

Or is it the case that the upgrade can be deducted only for capital gains purposes if the property/my home is being sold?


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## Bronte (29 May 2019)

Sarenco said:


> Thanks Gordon.
> 
> The works/upgrades to the existing bathroom as described by the OP don't strike me as repairs - they very much look like enhancements to me.


I disagree. And my accountant wouldn’t agree with you either. It’s a fact of rentals that every so often you have to do repairs/replacement. I spent nearly 6k on three existing shower rooms last tax year and my accountant said it’s fully deductible.

Things wear out, that’s tiling, shower basins, toilets, sinks. 

Even double glazed. Which once upon a time revenue considered enhancement. But if your old wooden window is rotten, you have to replace it with double glazing.


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## torblednam (29 May 2019)

I’m going to chime in and land myself into the middle ground here. 

On any reasonable consideration, where wear & tear has resulted in disrepair or dilapidation, at least part of the cost is indeed a repair. And as Bronte says, it could be a fair few quid.

But likewise, if the spec has gone from bog standard (pun intended!) to highly specced, then there may be an element of enhancement. 

It’s all about the facts of a particular case really.

I think it’d be entirely reasonable in the OP’s case, to claim the works on the pre-existing bathroom as repairs deductible against rental income. The cost of the new loo is enhancement expenditure, and relevant only to CGT.


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## elcato (30 May 2019)

torblednam said:


> The cost of the new loo is enhancement expenditure, and relevant only to CGT.


But is it not subject to wear and tear so therefor can be claimed in Capital Allowances over 8 years ?


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## torblednam (30 May 2019)

elcato said:


> But is it not subject to wear and tear so therefor can be claimed in Capital Allowances over 8 years ?



Unlikely. The only Capital Allowances allowable in a rental property are in respect of furniture & fittings. I doubt a meaningful proportion of the cost of a new bathroom could be disaggregated and identified as relating to furniture / fittings. I suppose you could argue that the toilet and the sink are only fittings and could be removed and used elsewhere without damaging themselves or the property (which is the distinction between a fitting and a fixture as I understand it). But really, would you go there...!


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## Sarenco (30 May 2019)

torblednam said:


> It’s all about the facts of a particular case really.


Absolutely.  


Broderick said:


> I want to replace the bath with a shower unit, tank the walls to prevent water running into the sitting room. Add warm board to the external wall to prevent damp. Put in an extractor fan. Replace wall and floor tiles.


I just don't see how installing items that were not there previously (shower, tanking, warm board, extractor fan) could possibly constitute "repairs". The OP isn't simply replacing items that have worn out or been damaged with similar or comparable items.

It seems to me that the installation of these items are enhancements to the property and would be treated as such by Revenue.


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## torblednam (30 May 2019)

Sarenco said:


> I just don't see how installing items that were not there previously (shower, tanking, warm board, extractor fan) could possibly constitute "repairs". The OP isn't simply replacing items that have worn out or been damaged with similar or comparable items.
> 
> It seems to me that the installation of these items are enhancements to the property and would be treated as such by Revenue.



While on a strict view that's certainly correct, I think you need to bear in mind that the only point in time that this is likely to be reviewed, is after the fact. The tax inspector has no realistic means of knowing the specifics of what was there beforehand... 

So, depending on what paperwork is available to illustrate the type of work that was involved, it's likely that one would accept an invoice describing the works as repairs to remediate leaks and install a new shower unit - it's entirely plausible that the works were in the nature of repairs. Obviously, that's a bit of a fudge from the taxpayer's perspective, but I doubt it would cause too many people to lose sleep over it in the grand scheme of things!


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