# Tax on Rental Income



## Joeyire (16 Sep 2008)

I understand that rental income is taxable at my appropriate band/rate. I am also given to believe that interest paid on the mortgage for the property can be offset against the rental income, thereby reducing the amount to be taxed.  Is this restricted to the interest amount, or can I 'offset' the full monthly mortgage repayment amount (interest and principle balance)?  Are there any other deductions I can claim against the tax on rental income - for example, wear and tear, depreciation of the house value etc.


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## FredBloggs (16 Sep 2008)

Joeyire said:


> I understand that rental income is taxable at my appropriate band/rate. I am also given to believe that interest paid on the mortgage for the property can be offset against the rental income, thereby reducing the amount to be taxed. Is this restricted to the interest amount, or can I 'offset' the full monthly mortgage repayment amount (interest and principle balance)? Are there any other deductions I can claim against the tax on rental income - for example, wear and tear, depreciation of the house value etc.


 
You can't deduct principal - just interest.
Wear and Tear on fixtures and fittings is allowed
You can't deduct depreciation of house value


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## ubiquitous (16 Sep 2008)

FredBloggs said:


> Wear and Tear on fixtures and fittings is allowed



At the risk of appearing pedantic, Wear and Tear is allowed on furniture (not fixtures) and fittings


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## Howitzer (16 Sep 2008)

Also, the interest can only be offset if you have registered your tenancies with the PRTB.


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## geri (16 Sep 2008)

Download the revenue's guide to rental income from the revenue website. This tells you what can be written off.  Really its any costs you bear in the course of letting your property.


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## Joeyire (16 Sep 2008)

Thanks all for your feedback..........Is wear and tear allowed as a percentage of the rental amount, or only against receipted items (where replaced) or both ?


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## webtax (16 Sep 2008)

If you do not have receipts for all your furniture & fittings you can use an estimate of their value (which you would be able to justify to your tax office in the event of an audit). A % of rental income is not permitted.


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## advisor (16 Sep 2008)

Joeyire said:


> Thanks all for your feedback..........Is wear and tear allowed as a percentage of the rental amount, or only against receipted items (where replaced) or both ?


 
Wear and tear is at the rate of 12.5% of cost of furniture.  Make an inventory of all furniture and fittings when first renting out property add up the value of these goods and multiply by 12.5% (this figure is then allowed over 8 years), if you buy an additional item e.g new bed.  Start a new list for the relevant item so that you get 12.5% x 8 years on the new item not just 12.5% of balance remaining on original purchases(remember if it is a replacement item to remove it from original list and recalculate allowafigure). Leaflet IT 70 from revenue.ie is very useful.


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## Mark_Mc (16 Sep 2008)

The bit in brackets below is not entirely correct. The amount before multiplication by 12.5% is the figure spread over 8 years, i.e. 12.5% per year.



advisor said:


> ...(this figure is then allowed over 8 years)...


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## Mark_Mc (16 Sep 2008)

I certainly would not call it pedantic. I would simply call it being right and nothing wrong with being right. 



ubiquitous said:


> At the risk of appearing pedantic, Wear and Tear is allowed on furniture (not fixtures) and fittings


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## Budda (18 Sep 2008)

I installed a new bathroom and kitchen prior to letting. Do they qualify as 'fittings' or do they come under the category of refurbishment? I lived in the property for a few months afterwards so I'd appreciate if anyone knows if/how I can account for the costs on my tax return.


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## Bronte (18 Sep 2008)

Budda said:


> I installed a new bathroom and kitchen prior to letting. Do they qualify as 'fittings' or do they come under the category of refurbishment? I lived in the property for a few months afterwards so I'd appreciate if anyone knows if/how I can account for the costs on my tax return.


 Expenses prior to letting can not be offset (except costs to get tenant's - ad's, estate agent etc)  You can write the kitchen etc off against capital gains tax when you sell.  There was at some stage a scheme that allowed you to upgrade/refurbish your property that was allowable against rental income but it no longer exists - open to correction on this as I'm not sure of the end date.


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## Budda (19 Sep 2008)

Thanks Bronte. Does anyone know if the monthly payments for life insurance, which was compulsory with the mortgage, are allowable as a cost against rental income? Thanks.


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## Bronte (19 Sep 2008)

Budda said:


> Thanks Bronte. Does anyone know if the monthly payments for life insurance, which was compulsory with the mortgage, are allowable as a cost against rental income? Thanks.


 Term life assurance (the cheap one that only covers the mortgage) is allowable (since 2002 - not sure of the year)  You chould  check out revenue.ie for more details on what's allowable and if in doubt you should use an accountant.


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## Jimmy Bond (19 Sep 2008)

As well as furniture depreciated at 12.5%, can electrical goods such as washing m/c's fridges etc be included for depreciation? Also I fitted out a house 2 years ago with furniture/electricals and I am going to rent it soon, can I still depreciate these items based on a remining 6 years or are any expenses prior to letting not allowed?


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## huf (23 Sep 2008)

I would also be grateful for a definitive answer to Jimmy Bond's question. I have read form IT70 many times and it is still not clear. Do furniture and fittings that were already in the property qualify as expenses that can be claimed for wear and tear or are they considered "pre-letting expenses".

It seems unfair if they don't qualify. You could spend a lot of money putting in new carpets etc just prior to first letting.


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## asdfg (23 Sep 2008)

> As well as furniture depreciated at 12.5%, can electrical goods such as washing m/c's fridges etc be included for depreciation?


Yes 



> I fitted out a house 2 years ago with furniture/electricals and I am going to rent it soon, can I still depreciate these items based on a remining 6 years or are any expenses prior to letting not allowed?


 
You need to list the items and value them now and depreciate over 8 years from the first letting. If you are reasonable with your valuations you should not have any problems with revenue so say reduce by 12.5 pa 

Say you buy something for 100 after one year value is 87.50 after 2 years value is 75 Use this as your starting point for depreciating over 8 years i.e. 9.38 pa


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## seánieboy (23 Sep 2008)

hi ,
      I bought an apartment in Budapest this year. I funded this venture through equtit


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## seánieboy (23 Sep 2008)

hi ,
I bought an apartment in Budapest this year. I funded this venture through equity on my own house in April of 2007. I invested these funds until i needed them to finish the deal in July of 2008.

In the mean time the bank sent me an interest certificate for the first year and even though i hadn't rented this apartment until july of this year can i still submit this interest certificate as an expence for tax purposes on my investment property what way can i claim this as an expence


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## paddyd (23 Sep 2008)

seánieboy said:


> hi ,
> I bought an apartment in Budapest this year. I funded this venture through equity on my own house in April of 2007. I invested these funds until i needed them to finish the deal in July of 2008.
> 
> In the mean time the bank sent me an interest certificate for the first year and even though i hadn't rented this apartment until july of this year can i still submit this interest certificate as an expence for tax purposes on my investment property what way can i claim this as an expence



If I've understood you correctly, not only can you not claim it as a deductable expense, but you are liable for tax at your current tax band on all interest earned (be it from a local or hungarian bank).
Generally speaking the three main deductables are mortgage interest, furniture and foreign tax paid.

Personally, I've got no tax balancing cert (assuming that what I should ask for) for '07 from the hungarian Revenue, so I'm loathe to put it on my form 12 in case I'm asked for it  
So my question is, what assurances that foreign tax has actually been paid will the Revenue Commissioners ask for? Or do they care?

EDIT: p.s. I'm declaring a net loss for '07


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## seánieboy (24 Sep 2008)

hi again,

           I kinda thought that i wouldnt be able to claim the interest on this until my apartment was rented out but i do know that i can claim the interest as an expense from the date it was rented out. i think this is correct anyway.

what makes you think that i have to pay 41% interest on that money i invested in an ordinary current account at the time i borrowed the money i paid 20%  dirt tax on this money when i took it out of the bank for when i needed it to pay off for my apartment

For the year 2007 as far as i know you should have paid tax on the 20th of May of this year and that you're meant to get a tax certificate and an official receipt book from the Hungarian tax authority. This is what i have been told. 
This tax certificate is meant to be put on youre form 12 for the irish revenue by october 31st declaring that you have paid 25% tax unless you have bought as a company as opposed to a private individual

i hope this helps


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## paddyd (24 Sep 2008)

seánieboy said:


> I kinda thought that i wouldnt be able to claim the interest on this until my apartment was rented out but i do know that i can claim the interest as an expense from the date it was rented out. i think this is correct anyway.
> 
> what makes you think that i have to pay 41% interest on that money i invested in an ordinary current account at the time i borrowed the money i paid 20%  dirt tax on this money when i took it out of the bank for when i needed it to pay off for my apartment



Thanks seanie, I'll check it out with the accountant.

sorry, I misunderstood you, thats correct all mortgage interest is deductable. Not sure why I thought you were referring to deposit interest


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## seánieboy (24 Sep 2008)

well i did invest the money that i borrowed for a few months and received deposit interest on this but i paid dirt of 20% on

 but i think that the interest that i paid on my loan is non deductable until such time as the apartment was actually rented out.

if you have anymore info regarding taxation in Hungary and how to submit it on form 12 give me a shout. all the best for now


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## paddyd (25 Sep 2008)

seánieboy said:


> but i think that the interest that i paid on my loan is non deductable until such time as the apartment was actually rented out.


correct.

If you only rented the apartment for 8 months of the 12; then you can deduct 8/12th's of the mortgage interest, and 8/12th's of the furniture etc etc etc.


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