# Help in taxation for rental income



## bibiphoque

Hi,
Like many people, we have bought at the wrong time (2007) and we cannot sell our apartment. The only option we have is to rent it and then go rent the three bedroom house we are looking for.

I realise now that there are tax implications in doing this (even though the rent won't cover fully the mortgage) and I'm looking for information of what those tax will be.

I did a bit of reading on the Revenue website but I need help just to make sure I get a rough number of what this is going to cost us (so I can budget for it). I will get an accountant to do that more accurately.

Our mortgage is €1050 a month, Mortgage allowance €130 (which I believe we will loose when we rent our property).

Rent: €900, accounting for 1 month no rent, total for the year €10000

Deductions:

Housecharge	100
Maintenance fee	900
Mortage Interest	@2% 5300
Boiler service	79
Mortage protection	670
letting agency 1000

Total = €1951, Income tax @ 41%, USC @ 7% and PRSI @ 4%, I owe €1014 to Revenue.

This is a rough calculation but does it look correct?

Also, what make sense in order to not pay tax? reduce the rent? do more yearly renovation in the apartment?

Thanks in advance.


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## Stockmaster

Your figures look right to me, except"Mortage Interest @2% 5300". i would check this one, as i am assuming that you are allowing fro full tax relief on Mortage Interest. I think that may be reduced to 75% now, with further reductions down the line. I am not sure of the status on this.


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## callybags

You will also have to pay NPPR (Non Principal Private Residence) charge of €200. Unfortunately this is not tax deductible, although the Revenue have not said this for definite.

I don't think the household Charge is tax deductible either.

Your mortgage interest is only allowed @ 75%.

You can claim Capital Allowances on furniture and fittings @ 12.5% of their current value for 8 years until the total value is written off.


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## elcato

Here is a sample P&L you should make out and keep the figures as you will need to check them each year. These figures are purely approximate and are for illustration. You should have more wear and tear in a large house and your interest may be higher or lower accordingly. You can carry any losses forward from previous years so if the final figure is negative you can carry forward to next year.
*
Wear & Tear*

12.5% over 8 years



Item     |Amount € 
3 Piece Suite |500
Table/Chairs  |600
Washing Machine |400
Fridge | 200
Blinds/Curtains | 800
Heaters | 300
Flooring/Carpets | 1500
Kitchen general | 500
Total | 4800

_*(1) 600*_

*General *



Expense |Amount € 
Management Fees |800
Insurance House|400
Insurance Life|500
PRTB | 90
Cleaning | 110
Boiler Service | 100
Total | 2000

_*(2) 2000*_

*Repairs*



Expense |Amount € 
Handyman painter|100
 Plumber |100
 Electrician|400
 Gardener|100
Accountant|300
Total | 1000
 
_*(3) 1000*_

Interest (75% of annual interest note: not mortgage repayments)

Total annual 4000 * 75%

_*(4) 3000*_

Total deductions  1 + 2 + 3 + 4
*(a) 6600*

Total rental return 900 * 11 
*(b) 9900*

Amount due for income tax b - a
*3300

**Expenses not allowed* 

NPPR of €200
Property Tax (although not clearly stated by revenue).
Initial fit out of furniture costs.
Initial repairs to bring place up to standard.
Initial cleaning.
Labour costs carried out by the Landlord at any time.


The Form12 should be completed and sent to revenue by October 31st of the following year in which you are filing for i.e. it is due in 
October 2013 for this year.


*Disclaimer : Figures are made up. Accountants may get paid more or less.


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## bibiphoque

*Thanks!*

Thank you so much for all of this, everything is clear now.


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## Macstuff

Just two additional points to consider. 
1. PreLetting expenses cannot be deducted i.e. expenses incurred prior to your FIRST rental. Any expenses you incur once tenants are in place or between tenants can be deducted. 
(Wear and tear on fixtures and fittings is not included in the statement above)

2. You must register with the NPPR in order to be able to claim relief on the mortgage payments. 

One question - do you need mortgage protection? IE if the apt. is now rented then you are less likely to need to/be able to make a claim. I know you can write it off against tax but you are still part funding it. Does renting out the property invalidate the terms and conditions of the mortgage protection?


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## mandelbrot

Macstuff said:


> Just two additional points to consider.
> 1. PreLetting expenses cannot be deducted i.e. expenses incurred prior to your FIRST rental. Any expenses you incur once tenants are in place or between tenants can be deducted.
> (Wear and tear on fixtures and fittings is not included in the statement above)
> 
> 2. You must register with the NPPR in order to be able to claim relief on the mortgage payments.
> 
> One question - do you need mortgage protection? IE if the apt. is now rented then you are less likely to need to/be able to make a claim. I know you can write it off against tax but you are still part funding it. Does renting out the property invalidate the terms and conditions of the mortgage protection?



In relation to the above:
1. A strict interpretation of the legislation would mean you are not entitled to wear & tear on furniture & fittings bought prior to letting, but I've never seen an issue with this in practice. However, the fixtures & fittings brought in are already some of the way through their tax-life, so they can only be written off over the remainder of it, at 12.5% of their cost p.a.

2. Should be PRTB, not NPPR. non-payment of NPPR has no income tax consequence, but is expensive in other ways!


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## bibiphoque

Macstuff said:


> One question - do you need mortgage protection? IE if the apt. is now rented then you are less likely to need to/be able to make a claim. I know you can write it off against tax but you are still part funding it. Does renting out the property invalidate the terms and conditions of the mortgage protection?



I'm not sure if I understand. For me, the Mortgage protection is there to help pay it off in case I or my partner dies. Why would this be different if you are renting the place?
Also, when we bought our apartment, it was mandatory to take a Mortgage protection. Has this changed now?


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## glynner

We have an apt for last 10 years and when we took out the  mortgage we took out mortgage protection ins on it. we were then told after a few years of paying this that we did not need mortgage protection for the apt as it was an investment property and if either of us died the place would be sold to pay back the mortgage, but as we had paid it for a number of years we kept paying it as it was basically a life insurance instead, the only thing is that it is reducing every year we have the property. We are not in negative equity thankfully so if anything did happen to either of us the mortgage would be cleared if we sold the place and we would still get something from the policy but as i said its reducing so i will need to see where we stand with the policy now, as it costs €32 pm it did not seem like a huge cost.


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## FunnyOnion

Hi - just a quick question in relation to this.  Am I correct in saying that you do not have to pay PRSI on your taxable rental income if you are a PAYE worker?

Also, if I'm making a loss on my rental property - do I still have to pay income tax and the USC on the rental loss?


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## elcato

> Am I correct in saying that you do not have to pay PRSI on your taxable rental income if you are a PAYE worker?


Yes but they plan on changing this in 2013


> Also, if I'm making a loss on my rental property - do I still have to pay income tax and the USC on the rental loss?


Really depends on what  you mean. If your rent - outgoings = positive figure then yes. BUT if your mortgage repayments are greater than rent then you are still liable on tax on the profit as per above calculations.


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## FunnyOnion

Thanks for that.  Yes I meant a rental loss as in rental income less deductions = negative figure.  Then this means no tax applies?


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## redspot

I'm jointly assesed with my wife. She is a PAYE worker where as I am not. We've been paying PRSI and levies for the last few years. Should we not have been?


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## elcato

> Thanks for that.  Yes I meant a rental loss as in rental income less  deductions = negative figure.  Then this means no tax applies?


Yes. And you can carry the loss forward to the following year. So if the next year yoiu make a profit you can deduct the loss from it. If it's still negative you can carry that forward to the following year, and so on.


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## elcato

> I'm jointly assesed with my wife. She is a PAYE worker where as I am  not. We've been paying PRSI and levies for the last few years. Should we  not have been?


On your rental income portion ? Or are you referring to general taxation ?


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## FunnyOnion

elcato said:


> Yes. And you can carry the loss forward to the following year. So if the next year yoiu make a profit you can deduct the loss from it. If it's still negative you can carry that forward to the following year, and so on.


 
Thanks Elcato!


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## norejon

Hi i had a tenant for 9 months paid no rent but cost me a fortune with solictors  , court and PRTB , I presume because tenant was paying no rent during that time , i cannot clain those expenses in my 2011return . Advice appreciated


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## Dermot

Sorry about your situation norejon but we all have been there. To answer your question you show the losses in 2011 and carry them forward to the 2012 returns.


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## norejon

thanks by losses do you mean solictor fes etc , and where do i put the losses on form . Is it in the expenses section.


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## mandelbrot

norejon said:


> thanks by losses do you mean solictor fes etc , and where do i put the losses on form . Is it in the expenses section.



Rental income is assessed to tax on the basis of rent receivable - this is to avoid certain avoidance mechanisms.

So in the first instance you are taxable on the all of the rent that you were entitled to receive in the year. There is a specific relief available for situations like yours (under Section 101 TCA 1997), which means that the total rent receivable can be reduced by the amount of any rent not recoverable... page 3 of this article has quite a good explanation of it [broken link removed].

The costs/fees etc... incurred in pursuing the tenant for the rent are fully allowable as expenses (as they are wholly and necessarily incurred in carrying on the letting business), and may result in there being a loss for the year.


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## norejon

thanks so much . I will review the link you sent . I will defintely have losses for 2011 .. i have paid prelimerary tax last yr for 2011 so would this then roll over

I know i was "entitled "to the rent  for 7 months  in 2011 but have never recieved it and will never  ... so when i calculate rental income do i just write in the 5months i received ?

Thanks againn


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## mandelbrot

norejon said:


> thanks so much . I will review the link you sent . I will defintely have losses for 2011 .. i have paid prelimerary tax last yr for 2011 so would this then roll over
> 
> I know i was "entitled "to the rent  for 7 months  in 2011 but have never recieved it and will never  ... so when i calculate rental income do i just write in the 5months i received ?
> 
> Thanks againn



Read the link 
_
"If by the time the tax return is submitted, it has become apparent that the rent is irrecoverable, then the section 101 claim should be made when submitting the tax return. A suggested approach is to set out the rental income computation as follows:

Rent receivable 100,000
Less *irrecoverable* amount not received (section 101 claim for relief) (5,000)
Net rental income 95,000
Less expenses… etc

Accompanying the rental computation will be a claim in writing containing sufficient detail to prove to the Revenue Commissioners that either the tenant defaulted and the rental income is irrecoverable, or that a waiver was made to avoid hardship on the part of the tenant._"


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## norejon

*carrying rent loss forward*

thanks so much nearly sorted .. one quick question 

how do you calacualte your losses , is it the expenses , interest relief and subtract the rent recieved

rent = 2100
 expenses = 3200
interest allowed = 1569



thanks in advance


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## elcato

Read the fourth or fifth post in the thread for an example of calculations 

liabilty = 3200 + 1569 = 4769
asset = 2100
Loss = liabilty - asset = 2669 to be carried forward to following year. Add any losses from previous year also


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## norejon

thanks so much. I have completed the ros online self assessment form and will carry that loss through to next year .


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## Bronte

There is a bit of confusion here.  To claim the 75% mortgage interest relief you must register the tenancy with the PRTB and it costs 90 Euro.


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## elcato

> Hi i had a tenant for 9 months paid no rent but cost me a fortune with solictors  , court and PRTB


This first post suggests that the latest poster has indeed registered.


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## JMJR

As you are changing from personal habitation to a tenancy you also have to consider that both the mortgage holder and the insurer may need to be informed and they may want to levy business rates instead of personal rates.
In the case of insurance you may only need buildings cover or it is possible to get a specific landlord policy which covers buildings and certain items like boiler/washing machine etc. Fire alarms may reduce the cost of cover.
The tenant is responsible for their own contents cover.




bibiphoque said:


> Hi,
> Like many people, we have bought at the wrong time (2007) and we cannot sell our apartment. The only option we have is to rent it and then go rent the three bedroom house we are looking for.
> 
> I realise now that there are tax implications in doing this (even though the rent won't cover fully the mortgage) and I'm looking for information of what those tax will be.
> 
> I did a bit of reading on the Revenue website but I need help just to make sure I get a rough number of what this is going to cost us (so I can budget for it). I will get an accountant to do that more accurately.
> 
> Our mortgage is €1050 a month, Mortgage allowance €130 (which I believe we will loose when we rent our property).
> 
> Rent: €900, accounting for 1 month no rent, total for the year €10000
> 
> Deductions:
> 
> Housecharge    100
> Maintenance fee    900
> Mortage Interest    @2% 5300
> Boiler service    79
> Mortage protection    670
> letting agency 1000
> 
> Total = €1951, Income tax @ 41%, USC @ 7% and PRSI @ 4%, I owe €1014 to Revenue.
> 
> This is a rough calculation but does it look correct?
> 
> Also, what make sense in order to not pay tax? reduce the rent? do more yearly renovation in the apartment?
> 
> Thanks in advance.


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## laois1

Just to clarify - is the USC/PRSI payable on the rental income profit ? Im a PAYE worker ....my accountant has always said this is payable on any profit ??


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## mandelbrot

laois1 said:


> Just to clarify - is the USC/PRSI payable on the rental income profit ? Im a PAYE worker ....my accountant has always said this is payable on any profit ??



Yup, see previous thread here: http://www.askaboutmoney.com/showthread.php?t=167255


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## Booter

I need some clarification on the area of "losses forward" mentioned a few times in this thread. 

With regard to tax returns on rental income, when making a return for say Year 2, where there was a loss in Year 1, is it mandatory to include the Year 1 loss as a "loss forward" on year 2 return? If I don't do this, can I then call the year 1 loss forward at a future date if I need it? I suppose another way of asking the question is, am I supposed to accumulate my losses as the years go on, and enter these on the annual Form 12?

(Hope that makes some sense!)


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## Nutso

Booter said:


> I need some clarification on the area of "losses forward" mentioned a few times in this thread.
> 
> With regard to tax returns on rental income, when making a return for say Year 2, where there was a loss in Year 1, is it mandatory to include the Year 1 loss as a "loss forward" on year 2 return? If I don't do this, can I then call the year 1 loss forward at a future date if I need it? I suppose another way of asking the question is, am I supposed to accumulate my losses as the years go on, and enter these on the annual Form 12?
> 
> (Hope that makes some sense!)



No - the loss must be set off against the first available rental income.


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## JKav

*Tax Collection Agent for non resident landlord - Who to ask?*

Hi,

I am a non resident landlord and i need to ask somebody to be a tax collection agent for me.  I would like to know what their responsibilities as an agent are and if they are personally liable for any tax I would owe? 

many thanks for any help with this query,

Jkav


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## Booter

Thanks Nutso, 

So lets say I've made a loss after deducting relevant expenses etc, but before
(1)Capital Allowances or 
(2)Losses forward from previous year

Does that mean that I can hold back (1) for a future year, but that (2) is effectively gone?


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## Ciall

Afternoon all,

I am a PAYE worker making my first ever tax return and I would really appreciate any help that is on offer here.

I am letting my apartment and have been since July 2011. I am currently making my tax return for 2011.

Here are the questions I have
1. I am making my tax return for 2011, but I only left the apartment for 6 months of the year. Will I include 75% of the Mortgage Interest I paid for 6 of the 12 months or the entire amount I paid in the year?
2. I pay a one off management charge once a year. Will I include the entire amount in my deductions or 50% of it (6 of 12 months?)
3. Wear and Tear. I bought the apartment in 2007 and we bought all the existing furnishings at the time separate to the apartment purchase contract. I left all these furnishings in the apartment when I left. Am I entitled to include 12.5% per year of the cost of this furniture as a deduction or am I only entitled to include furniture I bought since the letting?
4. Will I attach receipts or a P&L for my deductions to the Form 12 or will I wait for the revenue to ask for these after they assess my return?
5. I pay into my pension in work but my employers do contribute also. I am pretty sure they take off all sorts of deductions from this already. Do I have to include this and how much do I include (e.g. just what my employers contribute?).
6. I pay life insurance as a requirement of my mortgage. Is this deductable?

Thanking you in advance.


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## norejon

well you just claim for the 6 months > Rental income was for 6 months only so the outgoings are against that period of time

You do not attach receipts but keep in case of an audit
Are you registered with www. ros.ie . You can then file the return online


 Read this thread from the start . very helpful info on it. Also check out the revenue leaflet on rental income


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## Ciall

Thanks norejon! I am on ROS but I find the whole thing quite confusing. I'm not sure where to put the rental income in. I see a space for schedule E income but I thought rent was schedule D part V?


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## Nutso

Booter said:


> Thanks Nutso,
> 
> So lets say I've made a loss after deducting relevant expenses etc, but before
> (1)Capital Allowances or
> (2)Losses forward from previous year
> 
> Does that mean that I can hold back (1) for a future year, but that (2) is effectively gone?



My understanding is that if you made a loss for a second year, the loss for both years can be carried forward but must be set off against your first rental gain (or if you have another rental property gain can be set off against that).


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## Nutso

Ciall said:


> 3. Wear and Tear. I bought the apartment in 2007 and we bought all the existing furnishings at the time separate to the apartment purchase contract. I left all these furnishings in the apartment when I left. Am I entitled to include 12.5% per year of the cost of this furniture as a deduction or am I only entitled to include furniture I bought since the letting?



You can deduct a % of these as a capital cost - e.g. if you used the furniture for 2 years, then you should reduce the cost by 12.5% for 2 years and use this amount to calculate your capital expense.  My tax accountant told me that the balance could then be deducted over the following 6 years (rather than 8).


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## superfan

Nutso said:


> You can deduct a % of these as a capital cost - e.g. if you used the furniture for 2 years, then you should reduce the cost by 12.5% for 2 years and use this amount to calculate your capital expense.  My tax accountant told me that the balance could then be deducted over the following 6 years (rather than 8).



I am in a similar position except that I lived in my house for 3 years before renting it out.
Unfortunately though I don't have any of the receipts for furnishings from when I bought the house in 2007,can I still claim for this for the period 2011-15?


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## Nutso

Do you have any credit card statements or bank statements that would show the transactions?  I don't have all my receipts either, as we never intended to rent, however I went through credit card and bank statements and found most of the transactions, which I think is also considered proof of purchase.
I suppose you could make a guesstimate of the total cost but it would have to be a realistic figure.


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## superfan

Nutso said:


> Do you have any credit card statements or bank statements that would show the transactions?  I don't have all my receipts either, as we never intended to rent, however I went through credit card and bank statements and found most of the transactions, which I think is also considered proof of purchase.
> I suppose you could make a guesstimate of the total cost but it would have to be a realistic figure.



No,unfortunately not.I probably kept them for the 1st year or so but don't know where they are now.
I wasn't planning on ever renting my house out either,it was just how things panned out..


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## Ciall

I made a number of small purchases for the apartment in 2011(cushions, rugs, bathroom fittings) which I can track through credit card statements.
Can 100% of these "frivolous" purchases be deducted for tax purposes and will the credit card statements do me in the event of an audit. 
I stupidly didn't keep the receipts.


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## superfan

Nutso said:


> You can deduct a % of these as a capital cost - e.g. if you used the furniture for 2 years, then you should reduce the cost by 12.5% for 2 years and use this amount to calculate your capital expense.  My tax accountant told me that the balance could then be deducted over the following 6 years (rather than 8).



Just to clarify nutso,are you saying that if the furniture cost,say,€8000,that you reduce the cost by 25% for 2 years to €6000 and then take 12.5% for the next 6 years?


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## Nutso

Yes, you would take €6000 as the starting cost. Then deduct €1,000 (12.5% of original cost - not your new starting figure) over 6 years.  This was how I was advised to do it by my tax accountant.


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## T McGibney

Nutso said:


> Yes, you would take €6000 as the starting cost. Then deduct €1,000 (12.5% of original cost - not your new starting figure) over 6 years.  This was how I was advised to do it by my tax accountant.



Is this definitively correct? I'm not so sure. Depreciation is a business accounting concept that has little relevance for privately-owned consumer goods. 

I would argue that the appropriate starting cost should be, not the depreciated cost, but a fair valuation of the contents items at the date of first letting. 

Take the example of a damaged badly piece of furniture that happens to be a year old. It would be a nonsense to assume that it has retained 87.5% of its original value.


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## Nutso

T McGibney said:


> Is this definitively correct? I'm not so sure. Depreciation is a business accounting concept that has little relevance for privately-owned consumer goods.
> 
> I would argue that the appropriate starting cost should be, not the depreciated cost, but a fair valuation of the contents items at the date of first letting.
> 
> Take the example of a damaged badly piece of furniture that happens to be a year old. It would be a nonsense to assume that it has retained 87.5% of its original value.



I can only tell you that I got specialist advice on the matter and this is what I was advised to do.  In my case items were in use for 3 years but all furniture was in good condition and appliances in perfect working order.  

In the same manner, new appliances / furniture can only be written off at 12.5% per year, regardless of their state at the end of the year until they are replaced.


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## mandelbrot

T McGibney said:


> Is this definitively correct? I'm not so sure. Depreciation is a business accounting concept that has little relevance for privately-owned consumer goods.
> 
> I would argue that the appropriate starting cost should be, not the depreciated cost, but a fair valuation of the contents items at the date of first letting.
> 
> Take the example of a damaged badly piece of furniture that happens to be a year old. It would be a nonsense to assume that it has retained 87.5% of its original value.


 
Wear & tear allowances under S.284 are only ever granted on the basis of the actual cost of the asset in question - S.284(2)(ad) _"Where capital expenditure is incurred on or after 4 December 2002 on the provision of machinery or plant a wear and tear allowance for a chargeable period will be of an amount equal to 12.5 per cent of the actual cost of the machinery or plant"_

I think we had a thread on here before about the allowability or otherwise of capital allowances on fixtures & fittings in houses that were originally PPRs and subsequently become rental properties. S.284(6) & (7) state 
_"Wear and tear allowances are also available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc) provided by a lessor for the purposes of furnishing rented residential accommodation. The allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms in the open market."_​ 
A strict interpretation of this would suggest that no wear & tear may be due, but Revenue policy would appear to be that it is only equitable to allow wear & tear.​ 
S.287 sets out provisions for wear & tear allowances to be deemed to have been made. It states _inter alia_; 
_"The normal wear and tear allowance for a chargeable period is to be calculated on the basis __that —_
_• the trade had been carried on by the person concerned ever since that person acquired __the machinery or plant in such circumstances that the full amount of the profits or __gains of the trade were chargeable to tax,_
_• since its acquisition by the person concerned the machinery or plant had been used by __that person solely for the purposes of the trade,_
_• a proper claim had been made by the person for a wear and tear allowance in respect__of the machinery or plant for every relevant chargeable period,"_​

The meaning of all of which is that in the case of a PPR becoming a rental property, if any wear & tear is to be allowed it should be calculated on the basis that 12.5% the original cost p.a. has already been claimed for the prior years of ownership. So in the case of an asset that was 3 years old at time of first letting, it will be introduced at its original cost, already written down by 37.5%, with 62.5% remaining to be written off over the remaining 5 years.​ 
(All of the quotes above are taken from Revenue's Notes for Guidance ([broken link removed]), as they read more easily than the actual legislation itself.)


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## T McGibney

Interesting, thanks. I must re-read those notes when I get a chance.


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## Bronte

mandelbrot said:


> . So in the case of an asset that was 3 years old at time of first letting, it will be introduced at its original cost, already written down by 37.5%, with 62.5% remaining to be written off over the remaining 5 years.


 
I don't think that's correct. It would mean that if you rent a house after 8 years you would be entitled to write of zero for wear and tear. That link you've made doesn't look like it's for ordinary house rentals.

This thread has become very complicated and difficult to follow. It would be better if people have questions that they start their own thread. Also looks to me like a lot of people would do well to hire an accountant.  It's a tax deductable expense and won't break the bank.


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## mandelbrot

Bronte said:


> I don't think that's correct. It would mean that if you rent a house after 8 years you would be entitled to write of zero for wear and tear.


I'm afraid it's quite correct Bronte! Almost all assets which attract capital allowances have an 8 year tax life (and in the context of this thread, it is all such assets), so in the situation you've outlined above the owner is deemed to already have realised the value of the asset over the 8 years they've already owned it. 



Bronte said:


> That link you've made doesn't look like it's for ordinary house rentals.


The link I've made is to the sections of the taxes acts that govern wear & tear allowances for machinery & plant - principally S.284 "Wear and tear allowances".
S.284(6) and S.284(7) state that S.284 applies to lettings of premises which are taxable under Case V. (Furniture & fittings in a let property are classed as plant.)



Bronte said:


> This thread has become very complicated and difficult to follow. It would be better if people have questions that they start their own thread. Also looks to me like a lot of people would do well to hire an accountant. It's a tax deductable expense and won't break the bank.


It probably is a bit complicated for a lay person, but the entire tax system is governed by complicated legislation, which is exactly why people pay accountants & tax advisors!


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## T McGibney

mandelbrot said:


> the entire tax system is governed by complicated legislation, which is exactly why people pay accountants & tax advisors!



Worth noting also that some aspects are governed not by legislation but by Revenue edicts in the form of Tax Brieifings, eBriefs and other sources. One relatively recent example was the Revenue statement that NPPR was not an allowable deduction against rental income.


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## mandelbrot

T McGibney said:


> Worth noting also that some aspects are governed not by legislation but by Revenue edicts in the form of Tax Brieifings, eBriefs and other sources. One relatively recent example was the Revenue statement that NPPR was not an allowable deduction against rental income.


 
Good point, and one which serves to highlight the benefit of using someone whose bread & butter is to keep abreast of these things... good accountants always pay for themselves...


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## murphyep

Hi Folks,
I have a rental property which I purchased in 2007
The rent is currently 650 per month.
The mortgage is 800 per month.
Which is a shortfall of 150 per month( 1800 per year).

Can this shortfall be written off my tax bill at the end of the year?

Regards,
Ed


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## panindub

Hi Murphyep,

You can only allowed claim 75% of the Interest on the mortgage, not the full mortgage payment (Capital + Interest).


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## elcato

Murphyep

Not to be too harsh on new users but have you actually read the thread from the start ? All the information you need is there.


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## Delboy

folks, quick question
Tax liability due by tomorrow for 2011 liability.
But do you also have to pay a 'preliminary' tax for 2012 (best estimate of what is due for 2012?)


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## Dermot

Preliminary tax has also to be lodged with Revenue tomorrow. There are 3 ways of working out how you will be safe with the amount you pay in preliminary tax. I go for paying 100% of what I paid in 2011.


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## mandelbrot

Delboy said:


> folks, quick question
> Tax liability due by tomorrow for 2011 liability.
> But do you also have to pay a 'preliminary' tax for 2012 (best estimate of what is due for 2012?)



Quick answer, Yes!

The preliminary tax should be:
90% of the 2012 liability (how good are you at guessing), OR
100% of the 2011 liability.

Or failing that, whatever you can afford to pay along with the balance of your 2011 liability... they don't generally go looking for interest on underpaid preliminary tax unless it's substantial money. But they might, so if you can afford to, you should pay the 100%.


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## Delboy

thanks Mandelbrot. I'm advising a mate on this as they dont have a clue so just reading up as quick as I can as I know the deadline is tomorrow

2 other questions -
I have their PPS number but cant get them registered online through RAS. Is their some sort of trick to this? What category shoudl I select as none seem to work with their number!
Form IT10 says you should register (TR1) with the local tax office when the rental income starts to come in. I always thought the only registration needed was with the PRTB


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## mandelbrot

Delboy said:


> thanks Mandelbrot. I'm advising a mate on this as they dont have a clue so just reading up as quick as I can as I know the deadline is tomorrow
> 
> 2 other questions -
> I have their PPS number but cant get them registered online through RAS. Is their some sort of trick to this? What category shoudl I select as none seem to work with their number!
> Form IT10 says you should register (TR1) with the local tax office when the rental income starts to come in. I always thought the only registration needed was with the PRTB



Ah I love it, your friend has you flapping around while they remain blissfully ignorant of their own responsibilities! Seen it so many times...!

First things first, is the net rental income (rent receivable minus allowable interest and expenses) greater than €3,174 in 2011?

If no, then your friend doesn't need to register for income tax self-assessment or for ROS, bt just needs to complete a Form 12 for 2011, and he'll get a balancing statement in due course telling how much, if anything, he owes.

If yes, then your friend is possibly goosed, as it could take weeks to get registered for income tax via TR1 and then register for ROS, given that it's now the busiest time of year. But anyway the process would be:


Complete a form TR1 (to notify the tax office that he needs to be registered as a self assessed taxpayer).
Once he has his registration for income tax confirmed, he then can register for ROS to file his return online and pay his tax by DD mandate / Laser.
If he can get 1 & 2 above sorted before 15 November, he can just scrape the extended deadline for filing and paying online.


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## Delboy

mandelbrot said:


> Ah I love it, your friend has you flapping around while they remain blissfully ignorant of their own responsibilities! Seen it so many times...!
> 
> First things first, is the net rental income (rent receivable minus allowable interest and expenses) greater than €3,174 in 2011?
> 
> If no, then your friend doesn't need to register for income tax self-assessment or for ROS, bt just needs to complete a Form 12 for 2011, and he'll get a balancing statement in due course telling how much, if anything, he owes.
> 
> If yes, then your friend is possibly goosed, as it could take weeks to get registered for income tax via TR1 and then register for ROS, given that it's now the busiest time of year. But anyway the process would be:
> 
> 
> Complete a form TR1 (to notify the tax office that he needs to be registered as a self assessed taxpayer).
> Once he has his registration for income tax confirmed, he then can register for ROS to file his return online and pay his tax by DD mandate / Laser.
> If he can get 1 & 2 above sorted before 15 November, he can just scrape the extended deadline for filing and paying online.



As I work in finance, I was expected to know all this and thats how I got roped in!
No, rental income was small in 2011...house just rented for a few months (rented for all of 2012)
So 2011 net rental income (rent receivable minus allowable interest and expenses) = 1,600 or so
In 2012 that figure is going to be just under 5k

So just a form 12 is needed for now. Does the form 12 have a deadline of today or can that go in at any stage this year?
And then register in time with ROS for the Oct deadline for next year (tax will then be due for 2012 and preliminary tax for 2013)

Thanks for the help. Much appreciated as I spent hours reading various threads here, and trying to decipher the Revenue forms....but they're not the clearest


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## mandelbrot

Delboy said:


> As I work in finance, I was expected to know all this and thats how I got roped in!
> No, rental income was small in 2011...house just rented for a few months (rented for all of 2012)
> So 2011 net rental income (rent receivable minus allowable interest and expenses) = 1,600 or so
> In 2012 that figure is going to be just under 5k
> 
> So just a form 12 is needed for now. Does the form 12 have a deadline of today or can that go in at any stage this year?
> And then register in time with ROS for the Oct deadline for next year (tax will then be due for 2012 and preliminary tax for 2013)
> 
> Thanks for the help. Much appreciated as I spent hours reading various threads here, and trying to decipher the Revenue forms....but they're not the clearest



A form 12 only gives rise to a P21 balancing statement, I've never seen interest or penalties on one, so I wouldn't be panicking about getting it filed today.


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## Delboy

mandelbrot said:


> A form 12 only gives rise to a P21 balancing statement, I've never seen interest or penalties on one, so I wouldn't be panicking about getting it filed today.



thanks Mandelbrot for your time


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## bibiphoque

elcato said:


> *
> Wear & Tear*
> 
> 12.5% over 8 years
> 
> 
> 
> Item     |Amount €
> 3 Piece Suite |500
> Table/Chairs  |600
> Washing Machine |400
> Fridge | 200
> Blinds/Curtains | 800
> Heaters | 300
> Flooring/Carpets | 1500
> Kitchen general | 500
> Total | 4800
> 
> _*(1) 600*_
> 
> *General *
> 
> 
> 
> Expense |Amount €
> Management Fees |800
> Insurance House|400
> Insurance Life|500
> PRTB | 90
> Cleaning | 110
> Boiler Service | 100
> Total | 2000
> 
> _*(2) 2000*_
> 
> *Repairs*
> 
> 
> 
> Expense |Amount €
> Handyman painter|100
> Plumber |100
> Electrician|400
> Gardener|100
> Accountant|300
> Total | 1000
> 
> _*(3) 1000*_
> 
> Interest (75% of annual interest note: not mortgage repayments)
> 
> Total annual 4000 * 75%
> 
> _*(4) 3000*_
> 
> Total deductions  1 + 2 + 3 + 4
> *(a) 6600*
> 
> Total rental return 900 * 11
> *(b) 9900*
> 
> Amount due for income tax b - a
> *3300
> 
> **Expenses not allowed*
> 
> NPPR of €200
> Property Tax (although not clearly stated by revenue).
> Initial fit out of furniture costs.
> Initial repairs to bring place up to standard.
> Initial cleaning.
> Labour costs carried out by the Landlord at any time.
> 
> 
> The Form12 should be completed and sent to revenue by October 31st of the following year in which you are filing for i.e. it is due in
> October 2013 for this year.
> 
> 
> *Disclaimer : Figures are made up. Accountants may get paid more or less.



I really created a big thread here! Anyway, I do have a follow up question about your example, or more a clarification. In your example, you say "Amount due for income tax b - a = 3300". Does that mean that this is the amount taxable, i.e. if we use 52% (41% income tax, 7% PRSI and 4% USC) then I owe €1716?


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## elcato

> I do have a follow up question about your example, or more a  clarification. In your example, you say "Amount due for income tax b - a  = 3300". Does that mean that this is the amount taxable, i.e. if we use  52% (41% income tax, 7% PRSI and 4% USC) then I owe €1716?


Yes, that is my take on it and is what I do for my return except I think PRSI is 4% and USC is 7%.


> I really created a big thread here!


Agreed. Thread is now closed so that specific questions are seperated out.


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