As a landlord, calculating and declaring your rental income can be confusing. There are lots of different factors to consider, and as with any income, you don’t want to pay more tax than you have to.
It’s important to be aware of all the expenses you are allowed so you can accurately calculate how much money you’ll receive and how much you will need to hand over to the tax man. Knowing this information is key to your financial success as a landlord in Ireland.
So what tax relief is available to landlords? In this guide, we’ll take a look at the main areas where you can save money on your tax bill and the circumstances required to make a claim.
All rental properties will require occasional maintenance to keep them looking their best.
This includes things like cleaning, painting and decorating. The entire amount you spend for maintenance in a year can be claimed. Like all of the other expenses in this guide, it’s important that you keep hold of any documents relating to the cost for 6 years.
As well as maintenance costs, you are also entitled to claim expenses for repairs like rot treatment, fixing doors or windows or replacing roof slates. However, note that if you choose to carry out repairs yourself, you are not entitled to claim any cost for your own labour.
With both maintenance costs and repairs, you must also bear in mind that you cannot claim them if the work was carried out while the property was vacant or before you first let it out. As these forms of tax relief relates specifically to landlord activities, if the property is not being rented then they are no longer valid.
Residential Tenancies Board (RTB) Registration Fees
Almost all residential tenancies in Ireland must be registered with the RTB within one month of the start of the tenancy. The registration fee is €90 and, provided you do not incur any late fees, you can claim back the full amount against your tax return.
Not only is registration a legal obligation for most landlords, but without it you are not entitled to claim the interest on your mortgage, as detailed below. There are a few exemptions to RTB registration, including holiday lets and the Rent-a-Room scheme. To check whether your property is exempt, you can find the full list here.
Interest On Your Mortgage
It’s important to know that you are not allowed to claim your entire mortgage payment as an expense, even if you bought the property with the intention to rent it out. However, since 2019, landlords are entitled to claim 100% of the interest portion of their mortgage payment. This is also applicable to mortgages that you have taken out to improve or repair the property. Again, interest can only be deducted during the periods in which the property is let. This is especially important to bear in mind if you are looking to purchase a buy-to-let property. If you will need to do, for example, 6 months of work before letting it out, you will not be able to claim your mortgage interest for that 6 month period. This could have a significant impact on your earnings, so it’s good to be aware of the rules before you take the plunge. It doesn’t necessarily mean that you shouldn’t make the purchase, but rather that you should be sensible with how much you spend on the work so you aren’t left out of pocket.
Also known as ‘wear and tear allowances’, this expense can be availed by any landlord who has provided furniture or appliances for their rental property. If this is the case, you can claim capital allowances at a rate of 12.5% for a period of 8 years. This allows you to claim the full cost of the appliances over the 8 year period instead of in one go.
Let’s take a look at how this would work in practice. Say you provided a fridge for the property that cost €450 and a dishwasher that cost €350. All together, you spent €800. 12.5% of €800 is €100. This means that you can claim €100 per year against your rental income for the next 8 years.
If you are renting out property for the first time, check out our tax tips for first-time landlords.
Fees For Property-Related Services
Each time you rent out your property, you may enlist the services of various companies to secure a new resident and begin a new tenancy. For example, you may pay to advertise the property, hire a solicitor or an accountant, or use a lettings or outsource everything to a property management company. Unlike the other forms of tax relief in this guide, you can claim them even when the property is empty, as they are directly related to the lettings process.
If you are a non-resident landlord and use an intermediary to collect rent on your behalf, this service is also tax-deductible. For more information about letting property from abroad, head over to our guide Tax Requirements For Non-Resident Landlords.
Local Service Charges
If you (as opposed to your tenant) pay for rubbish collection, recycling or any other service provided by the local council then you can claim this as an expense. Naturally, this is only applicable if you do not bill the charges to your tenants after you have paid.
If you have taken out any kind of insurance relating to your rental property then you can claim back any premiums you pay. This could include premiums for mortgage protection policies, contents insurance (for furnished properties) or a specialist landlord insurance.
To learn more about the kind of insurance you need, you can take a look at our guide Everything You Need To Know About Landlord Insurance.
If you rent out a room in your home rather than a separate property, then you are exempt from income tax on your rental income up to €14,000 in a tax year. This is also applicable for a self-contained unit (e.g. a basement flat) as long as it is a part of or directly attached to your home.
However, you should note that rent-a-room relief doesn’t apply if you are letting the space to an adult child or if you let it out on a short-term basis as guest accommodation (for instance through Airbnb). For more information about tax requirements for short-term accommodation, you can find everything you need on the Citizens Information website.
As you can see, there is a fairly long list of allowed expenses that will help you save money on your tax bill as a landlord in Ireland. But remember, to ensure you don’t run into problems you must keep full and accurate records of any expenses you claim. To learn more about calculating and declaring your rental income yourself, you may like to read our guide, How To Calculate Income Tax On Irish Rental Income.
However, if you would like some assistance with your accounts and tax return, we are here to help. At SCK Property, we have a team of in-house chartered accountants who have years of experience working with landlords in Ireland. Along with comprehensive management services, we are well equipped to offer expert financial advice and identify any tax savings available to you.
To find out more, head over to our contact page to set up your free consultation, or take a look at our letting and management page for an overview of our packages. We look forward to hearing from you.