# Using AVC to reduce Rental Tax Liability - Is it Possible?



## Rebelrebel (20 Nov 2017)

Hi All,

Looking for some advice. My wife and I have a rental property which we started to rent out last year for 2 months. We hired a book keeper to file our tax return this Oct which was a liability of approx a couple of hundred euro and we paid the same in preliminary tax for 2017 liability. Next year however we expect our tax bill for 2017 to be considerably more as we will have rented for the full year and are on a tracker rate so the tax bill may be 6-7k and we will have to pay 90% of that in preliminary tax for 2018 also. 

My question is if we have a tax liability next Oct of 7k, is there any way we can reduce this tax liability by us each making a one off AVC totalling, for example, 14k. This 14K would be under the Max tax relief threshold for AVCs as we are not currently maxing out our contributions.

Is that allowed and will it reduce our rental tax liability and if as a consequence our Tax liability is reduced then our preliminary tax for the following year would only be 90% of this new tax liability amount? Is that correct?

Thanks.


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## Joe_90 (20 Nov 2017)

You can make pension contribution based on your earned income so if you have room based on that then you can make a contribution and get the benefit of that contribution in your Form 11.

You can't make a pension contribution based on rental income.


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## Rebelrebel (20 Nov 2017)

Joe_90 said:


> You can make pension contribution based on your earned income so if you have room based on that then you can make a contribution and get the benefit of that contribution in your Form 11.
> 
> You can't make a pension contribution based on rental income.


Thanks for the reply. Apologies if I'm not quite understanding this. So I can increase my AVCs to the maximum on my PAYE earnings, but I will still have to pay the full Tax amount on the rental income. Is that correct? So if I was to do what I suggest in my first post and make an AVC of 14k, I would still have to pay my rental tax liability of 7k plus the preliminary tax for the current year also?


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## Conan (20 Nov 2017)

AVC’s must be related to employment income. Rental income is not deemed as “earned income”. So you cannot invest AVC specifically out of rental income, but obviously if you do so out of your employment income (assuming you have an attaching occupational pension), the net effect is the same.


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## Thirsty (20 Nov 2017)

As far as I understand the process it's as follows (figures are averaged up for ease):

a. Rental income of (say) 10,000, from which after deductions you expect to pay  €4,000 in tax.
b. You make a lump sum AVC Payment of €8,000.
c. The AVC payment attracts a tax credit of €4,000.
d. €4,000 tax credit - €4,000 tax due = 0 tax to be paid.


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## jpd (20 Nov 2017)

You can make a pension contribution from any money you have (your money has no idea if it was earned from an employment or an investment) - but the tax relief is based on your earned income only, and there are limits on the total amount you can invest in a pension fund.

Limitations on AVCs
There are a number of limitations on AVCs:
• Only current active members of occupational pension schemes can contribute to an AVC, i.e. an
employee and current member of their employer’s occupational pension scheme.
• If the consumer leaves employment, he or she has to stop contributing to their AVCs related to that
employment.
• The maximum limit for income tax relief on employee contributions to all occupational pension
schemes of the same employment includes AVCs.
The benefits provided under the employer’s occupational pension scheme and under the AVC cannot
in total exceed the normal maximum Revenue approvable benefits for that individual.
If the combination of both scheme benefits gives rise to benefits in excess of the maximum Revenue
approvable benefits, then the benefits under the employer’s occupational pension scheme will be
reduced and if this gives rise to a surplus it may be returned to the employer as a taxable trading
receipt.
It is therefore important that individuals do not over contribute to AVCs at a level which may give
rise to total benefits in excess of Revenue maximum approvable benefits as otherwise they could
effectively end up subsidising their employer's contribution to the employer occupational pension
scheme.
• AVC benefits can only be taken at the same time as benefits are taken from the employer’s
occupational pension scheme; there is therefore no access to AVC funds before retirement, apart
from a once off access to 30% of the value of AVC funds for a three year period between 27th March
2013 and 27th March 2016.


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## Steven Barrett (20 Nov 2017)

Rebelrebel said:


> Thanks for the reply. Apologies if I'm not quite understanding this. So I can increase my AVCs to the maximum on my PAYE earnings, but I will still have to pay the full Tax amount on the rental income. Is that correct? So if I was to do what I suggest in my first post and make an AVC of 14k, I would still have to pay my rental tax liability of 7k plus the preliminary tax for the current year also?




Yes, but you are reducing the tax liability on your PAYE income. It has the same effect. 


Steven
www.bluewaterfp.ie


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## Rebelrebel (21 Nov 2017)

SBarrett said:


> Yes, but you are reducing the tax liability on your PAYE income. It has the same effect.
> 
> 
> Steven
> www.bluewaterfp.ie



Thanks for the replies everyone.

So Steven, In that case I would be just as well off upping my monthly AVC to the maximum tax relief threshold, assuming I can afford to, rather than making a one-off AVC in Oct? Or it amounts to the same thing really? Thanks again.


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## Steven Barrett (21 Nov 2017)

Whichever works best for your cashflow. The tax benefits are the same whether you pay monthly or annual lump sum. 


Steven
www.bluewaterfp.ie


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## Rebelrebel (21 Nov 2017)

SBarrett said:


> Whichever works best for your cashflow. The tax benefits are the same whether you pay monthly or annual lump sum.
> 
> 
> Steven
> www.bluewaterfp.ie


Excellent thanks. I think this gets to the point for me as from a cash flow perspective it probably makes more sense to make a lump sum AVC in Oct once I know my rental Tax liability.


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## Thirsty (3 Jan 2020)

You can't 'transfer' the rental income to a non-earning spouse.

You can however use AVCs to set against the tax payable on the rental income.

Very rough figures here: say your tax due on rental income is €5k, you can make an AVC to your pension of €10k and thus have no rental income tax.


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## RedOnion (3 Jan 2020)

Thirsty said:


> You can however use AVCs to set against the tax payable on the rental income.
> 
> Very rough figures here: say your tax due on rental income is €5k, you can make an AVC to your pension of €10k and thus have no rental income tax.


No you can't.


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## Thirsty (3 Jan 2020)

RedOnion said:


> No you can't.


Funny how I've done that for the last five years, isn't it?


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## RedOnion (3 Jan 2020)

Thirsty said:


> Funny how I've done that for the last five years, isn't it?


No you haven't.
You may think you have. You're getting the tax relief based on your non rental income. Rental income is not allowed for pension tax relief.


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## Thirsty (3 Jan 2020)

Neither you nor I are providing free tax advice.

Nor does any sensible person propose that an individual take action based solely on what they read online.

It is up to the OP (and any reader) to take what is posted here as use it as a guide.

Again, what I have stated is not incorrect; it is not illegal and perfectly do-able.


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## moneymakeover (4 Jan 2020)

It's already been discussed and disproved

Rental income tax has to be paid.

Tax relief can be obtained on pension contributions.

However one does not offset the other.

If you are making pension contributions and submitting rental income you just get less pension contributions than you would get if you didn't have rental income.


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## RedOnion (4 Jan 2020)

moneymakeover said:


> If you are making pension contributions and submitting rental income you just get less pension contributions than you would get if you didn't have rental income.


Sorry, that statement is even more misleading.

I've linked to another thread where it's fully discussed.


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## moneymakeover (4 Jan 2020)

Both cases below I'm assuming PAYE worker paying high rate of income tax.

Example 1
No rental income
Contribute 10k from savings to pension
Say high rate tax 40%
Actual contribution 10/.6 = *16.67k into pension*

Example 2
Rental income
Next year I do the same but this time I have 6.67k in rental profit. What happens?

Declare 6.67k rental profit
Contribute 10k lump sum from savings as before
Revenue calculates I have tax relief of 6.67k and reduces tax bill.
Actual contribution will be: *10k into pension this time.*

I think I saved paying tax but really no gain. Because now I have contributed less to my pension than previous year.


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## RedOnion (4 Jan 2020)

moneymakeover said:


> Both cases below I'm assuming PAYE worker paying high rate of income tax.
> 
> Example 1
> No rental income
> ...


With respect, I'm an accountant, and your post makes absolutely no sense to me.

If you've the same amount of PAYE income in each case, and contribute the same amount to your pension, then the tax relief is exactly the same.

Making a statement to the effect that having rental  income reduces the amount you can contribute to a pension is one if the most absurd things I've seen posted here.


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## Gordon Gekko (4 Jan 2020)

Why do people insist on overcomplicating this?

- Rental income is not pensionable
- However, one pays tax on 2019 rental income via the 2019 income tax return which is submitted on or before 31 October 2020
- That is also the mechanism for claiming tax relief on an AVC or pension contribution in respect of 2019 employment or self-employed income
- So what some people do is make the level of AVC required in order to eliminate the tax liability which arises on the rental income
- It’s purely a cashflow/conceptual point; they are not ‘making a pension contribution against rental income’; there are two distinct things happening, i.e. income tax on rent to be paid and tax relief on a pension contribution in respect of salary/earnings which can be netted off against each other from a cashflow/payment perspective


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## Conan (4 Jan 2020)

moneymakeover said:


> Both cases below I'm assuming PAYE worker paying high rate of income tax.
> 
> Example 1
> No rental income
> ...


If you contribute €10k in each case to the Pension,  then your net cost is €6k after tax relief. It's the same in either example. Your pension tax saving is €4k. Your tax liability on the rental income is unchanged.


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## moneymakeover (4 Jan 2020)

RedOnion said:


> With respect, I'm an accountant, and your post makes absolutely no sense to me.
> 
> If you've the same amount of PAYE income in each case, and contribute the same amount to your pension, then the tax relief is exactly the same.
> 
> Making a statement to the effect that having rental  income reduces the amount you can contribute to a pension is one if the most absurd things I've seen posted here.



 Please note I said pay the pension contribution from savings.

The tax on the rental income does in fact reduce the resulting effective pension contribution.

There is no silver bullet to avoid paying tax on rental income.


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## moneymakeover (4 Jan 2020)

Conan said:


> If you contribute €10k in each case to the Pension,  then your net cost is €6k after tax relief. It's the same in either example. Your pension tax saving is €4k. Your tax liability on the rental income is unchanged.


Conan note my example is using after tax 10k.

I said "*from savings*".

In this case the revenue will give additional relief

Which is where the 6,667 comes from.

Effectively contributing 16,667

If you contribute €16,667k in first case to the pension,  then your net cost is €10k after tax relief. In the second in example. Your pension tax saving is €6,667. Your tax liability on the rental income is 6,667. They cancel each other out. 
And the effective increase in pension is 10k
Unlike the first case.


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## bbari1 (4 Jan 2020)

My understanding in a simplified way

*Scenario - 1*
PAYE income: €100K
Pension in employment: 0
Rental income: 0
Tax Bill: €40K

*Scenario - 2*
PAYE income: €100K
Pension in employment: €10K
Rental income: €10K
Tax Bill: €40K

Tax bill stays the same in both scenarios as the total income after the pension stays the same but you have addition 10K in your pension in the 2nd scenario. Yes, you are taking €10K for the pension from your PAYE income pot as you can't use rental income for the pension purposes. You are just taking €10K from your right pocket instead of left pocket ?


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## moneymakeover (4 Jan 2020)

What GG said is correct
They can be netted off against each other
But it's important to tell those naïve people who think if they don't make the pension contribution they are in some way missing out.


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## Thirsty (4 Jan 2020)

moneymakeover said:


> tell those naïve people who think if they don't make the pension contribution they are in some way missing out


Really? The overwhelming financial advice for almost everyone is to make pension contributions.


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## Thirsty (4 Jan 2020)

You are just taking €10K from your right pocket instead of left pocket ?
[/QUOTE said:
			
		

> Not really, from my point of view.
> 
> I have (say) €5k sitting in my bank waiting to be paid to revenue in tax due.
> 
> Instead of giving it to Revenue in tax, I can add my €5k savings / bonus / whatever & put €10k into an AVC.


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## moneymakeover (4 Jan 2020)

To clarify, and what I should have said,

It's important to tell those naïve people who think they are in some way missing out on tax relief on rental income if they don't make a pension contribution.

Of course pension contributions are important.
Just not to be confused with saving on rental income tax.

There is a nuance to it whereby you can think you're avoiding tax. But you're just reducing your effective pension contribution.


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## Thirsty (4 Jan 2020)

"But you're just reducing your net pension contribution." 

I thought this assertion had already been contradicted?


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## moneymakeover (4 Jan 2020)

*Scenario - 1a*
PAYE income: €100K
Pension in employment: 0
Rental income: 0
Tax Bill: €40K
Net Income: 60K

*Scenario - 1b*
PAYE income: €100K
Pension in employment: €10K (6k from after tax income and 4k from tax)
Rental profit: 0
Tax Bill: €36K (40k - 4k pension relief)
Net Income 54k

*Scenario - 2*
In this scenario the accountant tells me I have made 10k profit on my rental property.
I have a 4k tax liability
Say I wasn't making any pension contribution (like 1a above)
I was going to write a cheque from my hard earned savings account for €4k but the accountant tells me :
Hey I have a great trick: just contribute 10k to your pension. Like in case 1b

What happens?

PAYE income: €100K
Pension in employment: €6K (€6k from after tax income)
Rental profit: €10k
*Tax Bill: €40K (40k - 4k pension relief + 4k rental liability)*
Net Paye Income €54k

Notice what happens: the net paye income is same: 54k
The tax man gets an extra 4k
The pension only increases by 6k

My take home pay is the same.
Myself and the accountant are great buddies
But the tax bill for the rental has been paid from what would have been the pension
and the revenue commissioners get their €40k : 36k plus 4k rental property tax.

What is the difference between 1b and 2?
In 1b we get 10k pension contribution
In 2 we get 6k pension contribution and revenue gets the 4k


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## RedOnion (4 Jan 2020)

moneymakeover said:


> just contribute 10k to your pension. Like in case 1b
> 
> What happens?
> 
> ...


This is the bit you have wrong. If you contribute 10k to pension, then your pension increases by 10k. 
If you fix your calculations, you'll end up with the exact position that others have explained thoroughly earlier. 
10k of pension contribution costs net 6k, regardless of where the money has come from.


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## moneymakeover (4 Jan 2020)

well I disagree 
In my calculations the tax is paid for the rental income
What you're describing the revenue commissioners don't get their 4k


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## Conan (4 Jan 2020)

The flaw in you’re original Scenario 1 is that you are investing €16.7k and then getting a tax refund of 40%, bringing the net cost down to €10k. It’s not the case that you invest €10k from savings and the Revenue add €6.7k. In your Scenario 1 you actually have to invest €16.7k and therefore you have €16.7k in the Fund. In the second Scenario you invest €10k and get a tax rebate of €4K but you only have €10k in the Fund as compared to Scenario 1. 
I still think you are comparing apples and oranges.


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## moneymakeover (4 Jan 2020)

Okay if you prefer as follows

Example 1
No rental income
Contribute 16.67k from savings to pension
Say high rate tax 40%
Actual contribution *16.67k into pension*
Revenue will refund 6.67k
Net cost after revenue refund 10k (!)
I would have said this is same as my original just the sequence slightly different.

So what I'm saying still holds.

second scenario was different example.
10k comes out of gross paye
The 4k is reduced from going to revenue commissioners
Okay?


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## Itchy (5 Jan 2020)

moneymakeover said:


> *Scenario - 1a*
> PAYE income: €100K
> Pension in employment: 0
> Rental income: 0
> ...



I couldn't really follow your thought process. Some things highlighted.


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## The Horseman (5 Jan 2020)

% of earned income can attract tax relief. If this % used up you don't get any further tax relief. If you have €10k rental income and you still have €10k of your % earned income allowance left you invest the €10k in your avc. Your avc pot has increased by €10k you claim back €4k from revenue.

You have invested €10k in your avc but it has only cost you €6k in actual cash.


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## moneymakeover (5 Jan 2020)

Itchy said:


> I couldn't really follow your thought process. Some things highlighted.


You're not adjusting this figure?

*Tax Bill: €40K (40k - 4k pension relief + 4k rental liability)*
What I'm saying very simple, the normal 4k tax relief is used up by paying the tax bill for the rental property


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## moneymakeover (5 Jan 2020)

The Horseman said:


> % of earned income can attract tax relief. If this % used up you don't get any further tax relief. If you have €10k rental income and you still have €10k of your % earned income allowance left you invest the €10k in your avc. Your avc pot has increased by €10k you claim back €4k from revenue.
> 
> You have invested €10k in your avc but it has only cost you €6k in actual cash.




The 10k is earned income consists of 6k after tax plus 4k tax

Because 10k going to pension, the revenue concedes 4k of relief

BUT the 4k of relief doesn't end up in pension because it is used to offset the 4k tax bill for the rental property


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## The Horseman (5 Jan 2020)

moneymakeover said:


> The 10k is earned income consists of 6k after tax plus 4k tax
> 
> Because 10k going to pension, the revenue concedes 4k of relief
> 
> BUT the 4k of relief doesn't end up in pension because it is used to offset the 4k tax bill for the rental property


Rental income is not earned income. You pay 10k into your pension. You invest 10k in cash in your pension. 

Revenue give you back 4k. So you have invested a net of 6k actual cash. Your pension has increased in value by 10k and it has cost you 6k.


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## moneymakeover (5 Jan 2020)

In my example above I was taking 10k of gross paye income

You're taking 10k of after tax savings.

That's equivalent to 16.67k gross income

In your example, you say revenue give you back 4k. I know that's what happens normal lump sum pension contribution (no rental income).

But what happens when there is rental income/tax liability?


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## moneymakeover (5 Jan 2020)

The Horseman said:


> Rental income is not earned income. You pay 10k into your pension. You invest 10k in cash in your pension.
> 
> Revenue give you back 4k. So you have invested a net of 6k actual cash. Your pension has increased in value by 10k and it has cost you 6k.


Unless you mean you send in 10k
10k goes to your pension
And revenue does not refund you 4k?
But keeps it for the rental income liability?


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## The Horseman (5 Jan 2020)

moneymakeover said:


> In my example above I was taking 10k of gross paye income
> 
> You're taking 10k of after tax savings.
> 
> ...


 Rental income is not earned income so you don't get tax relief on rental income. I am an accountant and have been a landlord for the last 12 yrs so I know what I am talking about. 

If the above does not make sense to you I will respond tomorrow when I am at my desk.


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## moneymakeover (5 Jan 2020)

Nobody is disputing 

"Rental income is not earned income so you don't get tax relief on rental income."

we know the relief is on paye income.


here's an example


John has a lump sum savings 10k he will pay to his pension. John has no rental income.

He sends a cheque to pension company in October as additional avc and they add to his pension. 
they tell revenue who duly refund John 4k 


Tom has 10k rental profit. He owes revenue 4k tax.

He sends a cheque to his pension company for 10k

They credit his pension 10k and tell revenue.

You're saying revenue refund Tom 4k same as John? Both get same benefit even though only Tom has rental income?


(Both cases above they both have 80k paye income)


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## The Horseman (5 Jan 2020)

moneymakeover said:


> Nobody is disputing
> 
> "Rental income is not earned income so you don't get tax relief on rental income."
> 
> ...


 John gets his 4k back but Toms 4k cancels out his tax liability for his rental income.


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## moneymakeover (5 Jan 2020)

The Horseman said:


> John gets his 4k back but Toms 4k cancels out his tax liability for his rental income.


That's what I said:

"Unless you mean you send in 10k
10k goes to your pension
And revenue does not refund you 4k?
But keeps it for the rental income liability?"


That is my point
There is no silver bullet
The liability has to be paid
Revenue keeps the 4k

What some people were saying was that by making the pension payment was like making the liability  magically disappear.


And my figures in scenario 1,1b,2 are correct.
They are using gross income to fund the pension contribution. I can see now people found that confusing.

So in summary @Thirsty the cost is in not getting any refund from revenue commissioners.


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## moneymakeover (5 Jan 2020)

Conan said:


> In the second Scenario you invest €10k and get a tax rebate of €4K but you only have €10k in the Fund as compared to Scenario 1.
> I still think you are comparing apples and oranges.




What we have agreed is that if we take 10k cash
And contribute that into pension
If there is rental income the net cost is 10k (there is no rebate)

If there is no rental income the net cost is 6k


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## moneymakeover (5 Jan 2020)

So let me try again

John, no rental income sends cheque for 16.67k to his pension
Receives rebate 6.67k
Pension goes up by 16.67k
*Net cost 10k*


Tom with rental income 10k sends cheque for 10k
His pension increases by 10k
No rebate
*Net cost 10k*


Whether Tom makes pension contribution or not is immaterial to his tax liabilities.

Why is Tom's pension contribution less than John's?
*Because of the rental income*


What is the effect of the rental income?
The effect of the rental income is to reduce the contribution to the pension versus another person who has no rental income.


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## The Horseman (5 Jan 2020)

moneymakeover said:


> So let me try again
> 
> John, no rental income sends cheque for 16.67k to his pension
> Receives rebate 6.67k
> ...



I am out of this topic now. At this point I think you are trolling now. I and others have explained how this works and you still want to continue post on it.


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## Conan (5 Jan 2020)

Rarely have I seen something so simple turned into something on the lines of quantum physics.  Many regular contributors have explained how this works but the original poster is not listening. Do whatever you want.  I'm out.


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## moneymakeover (5 Jan 2020)

Well I think I also have explained that having rental income reduces the effective pension contribution

Which was disputed until our little exchange earlier

The title "Using AVC to reduce Rental Tax Liability - Is it Possible?."

The Avc doesn't actually reduce rental liability.

You can make an Avc. If you do Revenue Commissioners can use some of that towards your rental income liability. You're paying your rental income liability. And making a reduced Avc contribution.

Think of it as
Pay your 4k tax liability
Pay 6k to pension (results in 10k increase)

The answer to the question  "Using AVC to reduce Rental Tax Liability - Is it Possible?."
No. In fact, the rental liability reduces the Avc.


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## Gordon Gekko (5 Jan 2020)

Rarely have I seen such unnecessary complexity on AAM.

- Someone has rental income
- He also has PAYE income
- The income tax on his rental income is €4k
- Instead of paying €4k to Revenue, he withdraws €10k from his deposit account and contributes it to his pension
- The €4k tax liability and the €4k of tax relief cancel each other out
- He’s now got €10k in his pension fund, but it only cost him €6k, because he used €10k of his savings but he then didn’t have to pay Revenue the €4k that they would otherwise have got. 

His choice was therefore:

- Use €4k of his savings to pay his tax bill, leaving him with €6k of savings, or

- Contribute €10k of his savings to his pension fund leaving him with no savings, but with €10k in his pension fund


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## moneymakeover (5 Jan 2020)

The point I'm trying to emphasise is:
There are two things going on.
Which stand totally independently.
A tax payment of 4k and an Avc net 6k equals gross 10k.
If you choose to make a pension contribution you certainly can.
But don't confuse it with a tax liability.
Also don't encourage everyone out there with a 4k rental income liability to pay 10k to their pension thinking they are getting a bargain. They're not.
And that by not paying 10k they're missing out on free money.


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## Gordon Gekko (5 Jan 2020)

moneymakeover said:


> The point I'm trying to emphasise is:
> There are two things going on.
> Which stand totally independently.
> A tax payment of 4k and an Avc net 6k equals gross 10k.
> ...



They are missing out on free money. Why? Because of the ‘use it or lose it’ nature of AVCs.

I have €10k on deposit. I need to pay Revenue €4k which will leave me with €6k.

However, if I’m willing to give up that €6k, I can put €10k into my pension fund.

That’s the deal: I pay €6k to get €10k...free money, or at a minimum the free use of it to invest for a prolonged period.


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## fidelcastro (5 Jan 2020)

Brendan please lock this discussion for sake of our mental health. ..,..Gordon et al have clarified /explained this ad nauseam


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## moneymakeover (5 Jan 2020)

.


Gordon Gekko said:


> They are missing out on free money. Why? Because of the ‘use it or lose it’ nature of AVCs.
> 
> I have €10k on deposit. I need to pay Revenue €4k which will leave me with €6k.
> 
> ...



Before I clarified matters people might have mistakenly believed there was some advantage in making the 10k contribution.

There isn't. Make the 4k tax payment. And any avc that suits.


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## Gordon Gekko (6 Jan 2020)

moneymakeover said:


> .
> 
> 
> Before I clarified matters people might have mistakenly believed there was some advantage in making the 10k contribution.
> ...



Let’s give it one more go; there are effectively two options:

- Pay €4k of tax off into the ether, or
- Pay an additional €6k into your pension and Revenue will divert the €4k tax payment into your pension

I think the point you’re missing is that the €4k of tax is an existing liability; it already has to be paid. By ponying up a further €6k, I rescue my €4k from Revenue’s clutches and get it back to put into my pension.


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## torblednam (6 Jan 2020)

Oh dear god this is like having teeth pulled... I suppose I have nobody to blame but myself for continuing to read!


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## Itchy (6 Jan 2020)

moneymakeover said:


> Before I clarified matters people might have mistakenly believed there was some advantage in making the 10k contribution.
> 
> There isn't. Make the 4k tax payment. And any avc that suits.



There is an advantage. The tax payment goes into your pension if you make the avc rather than to Revenue. That's the benefit. The AVC limit is capped by your EARNED income regardless on the amount of UNEARNED income (I.e. rental income) you have. 

If you accept that then the rest is just balancing your tax liabilities with Revenue.


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## moneymakeover (6 Jan 2020)

Itchy said:


> There is an advantage. The tax payment goes into your pension if you make the avc rather than to Revenue. That's the benefit. The AVC limit is capped by your EARNED income regardless on the amount of UNEARNED income (I.e. rental income) you have.
> 
> If you accept that then the rest is just balancing your tax liabilities with Revenue.





Firstly the tax payment MUST be paid. Nobody disputes that?

After that you can make any amount of avc contributions you like subject to paye income limits/age.

What I'm saying is don't confuse the two.

People seem to think they must make lump sum pension contribution end of tax year or they are missing out. They're not. Pay the tax. Pay the avc.

If you can afford it AND you want to make an additional Avc by all means do this way you describe.

But you can always pay even more avc. If the paye /age allows it.

The pension tax advantage exists completely separately from rental income.


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## Itchy (6 Jan 2020)

Grand. This is the confusion..



moneymakeover said:


> If you are making pension contributions and submitting rental income you just get less pension contributions than you would get if you didn't have rental income.


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## moneymakeover (6 Jan 2020)

Itchy said:


> Grand. This is the confusion..


When you say "this is the confusion"

Are you endorsing what is in quotes?
Or suggesting it's incorrect?
Ie
Your post is confusing 

As I said and was agreed

John no rental income can contribute 16.67k can lump sum and will have pension increase by 16.67k
*When revenue refund 6.67k the net cost to John is 10k*

Tom with 10k profit ie 4k rental income liability can contribute 10k cash. Revenue refund nothing.
His liability is paid
His pension increases by 10k

Why is his pension contribution reduced compared to John?
Because of his rental income liability.
*Tom gets 6.67k less pension contribution than John*

So hope you're no longer confused


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## Thirsty (6 Jan 2020)

So some how you propose

"John ... can contribute 16.67k... and will have pension increase by 16.67k"

"Tom .... can contribute 10k... "

And then you suggest that because of rental income Tom has less pension contribution!

Tom has less, because he paid less!!


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## moneymakeover (6 Jan 2020)

Thirsty said:


> So some how you propose
> 
> "John ... can contribute 16.67k... and will have pension increase by 16.67k"
> 
> ...


Both pay effectively 10k


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## Thirsty (6 Jan 2020)

No.

One pays 16.6k and the other pays 10k


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## Gordon Gekko (6 Jan 2020)

moneymakeover said:


> Both pay effectively 10k



You have an extraordinary blind-spot in relation to this.

They don’t “both pay effectively €10k”. 

One “pays effectively €10k” and the other “pays effectively €6k”.

And the former ends up with €16.67k in the pension, whilst the latter ends up with €10k in the pension.


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