Tax on Rental Income

J

Joeyire

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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.
 
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.
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You can't deduct principal - just interest.
Wear and Tear on fixtures and fittings is allowed
You can't deduct depreciation of house value
 
Also, the interest can only be offset if you have registered your tenancies with the PRTB.
 
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.
 
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 ?
 
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.
 
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 ?
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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.
 
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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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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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.
 
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.
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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.
 
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.
 
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.
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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.
 
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?
 
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.
 
As well as furniture depreciated at 12.5%, can electrical goods such as washing m/c's fridges etc be included for depreciation?
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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?
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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
 
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
 
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
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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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