# AVC payment to reduce tax



## Eddie Peters (19 Feb 2017)

Just wondering if a lump sum AVC payment can help to reduce a rental income liability. I am working in private sector with a DB pension plan. Honestly, I don't have much confidence in pensions and decided that property investment was a better option. This could be related to a presentation by a pension actuary saying that they didn't expect workers in the 1980s to live so long...


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## aristotle (19 Feb 2017)

No. Can't be done against rental income unfortunately.


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## Eddie Peters (19 Feb 2017)

Thanks for the informative reply


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## losttheplot (19 Feb 2017)

Is there some way you can set the rental property up as part of a self directed pension?


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## Gordon Gekko (19 Feb 2017)

It depends on the question you're asking.

As others have highlighted, pension contributions are not deductible against rental income.

However, plenty of people prepare their tax return, see that a rental property is throwing up a tax liability of (say) €4,000, and then just make an AVC of €10,000 to "eliminate" the tax liability.

The AVC is generating tax relief of €4,000 against salary, but the net effect is the elimination of the rental income related tax liability.


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## Logo (21 May 2017)

Eddie Peters said:


> Just wondering if a lump sum AVC payment can help to reduce a rental income liability.



Assuming a rental tax bill of €5K in Oct 2017 and the liable employee pays a once-off lump sum cheque of €10K into an AVC scheme in Oct 2017 - can they claim approx half of this to offset the rental tax bill - or does lump sum payment have to be paid in the previous year. Tks


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## Gordon Gekko (21 May 2017)

No, that would work. The €10k contribution would generate tax relief of €4k to be credited against the €5k (assuming the employee's salary is high enough).


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## Steven Barrett (21 May 2017)

losttheplot said:


> Is there some way you can set the rental property up as part of a self directed pension?



It has to be arms length. You can't sell a property you own to your own pension plan. 

And how would the pension scheme pay for it? ICS have started lending for properties through pensions but the LTV is 50% with a 10% float plus costs. 

As Gordon said, rental income isn't pensionable but people just max out the tax relief from their earned income to reduce their overall tax liability. It will cost your more to put money into a pension than to just pay the tax but you will also have money in a pension plan that can be used in retirement. 

Steven 
www.bluewaterfp.ie


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## SqueezedMiddle (26 May 2017)

Gordon Gekko said:


> No, that would work. The €10k contribution would generate tax relief of €4k to be credited against the €5k (assuming the employee's salary is high enough).



If you were company pension scheme already contributing the max for your age, do you just increase your avcs over the max and then you make the saving at the end of the year on form 11?

Or is it only workable where you haven't already maxed out tax relief on your pension?


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## Steven Barrett (26 May 2017)

The example given was assuming you weren't maxing out your pension contributions. If you can't claim tax relief on the AVC's, it won't work. 


Steven
www.bluewaterfp.ie


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## Leinstor (3 Aug 2017)

Can I ask how this works?  I'm only starting to pay into avc's this month and will be due to pay tax of say €4000 on rental income in October.  Can I just pay 10k lump into my avc? What are the likely fees for this and how do I reconcile with revenue in October?


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## diceyreilly (7 Nov 2017)

If you paid extra AVCs into a pension (college lecturer) to offset the rental income tax can you retrieve the AVCs at any stage in the future(near).


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