TAX & Revenue
What types of Rental Income are there?
Rental income from letting a house, flat, apartment, office, building etc. is the most common type.
Income from easements, i.e. if payment is received for the right to erect advertising signs, communication transmitters, conacre or grazing rights.
Certain leases, normally on non-residential property such as a shop or warehouse, that requires the payment of a premium by the tenant to the landlord. Where the lease granted is of less than 50 years, some of the premium charged will be treated as rent.
A person may claim a deduction from gross rent for legitimate property related expenses as follows:
- Ground Rent
- General Repairs (Capital Expenditure excluded)
- Management Fees: paid to an agent e.g. rent collection
Note: Landlords may not claim for their own labour.
- Service charges (water/refuse etc.)
- Advertising for tenants
- Accountants fees for preparing rental accounts 96/97 onwards.
- Wear and Tear – Depreciation of furniture and fittings
With effect from 4 December 2002 the allowance is 12.5% per year over 8 years.
For the period between 1 December 2001 and 3 December 2002 the allowance was 20% per year over 5 years. Transitional provisions apply allowing the rate of 20% per year over 5 years if the item was acquired under a written contract before 4 December 2002 and the expenditure was incurred before 31 January 2003.
Prior to 1 January 2001 the allowance was 15% per year for the first 6 years and 10% in the 7th year
Building Expenditure – in a Renewal incentive area
Interest – Relief is due for 75% of interest paid on loans to purchase, improve or repair a residential premises (some exceptions).
Note: No relief due on interest paid on loans granted between 23/4/1998 and 31/12/2001 inclusive.
During this period interest relief continued to be allowed for
- a) Commercial lettings and
- b) Existing residential lettings at 23/4/98, provided the landlord owned the premises at 23/4/98.
Rent paid to non-resident landlord – If the rent is paid to an agent acting on behalf of landlord, agent is assessed on the rent.
If however the rent is paid to the landlord abroad or to an account on his behalf the tenant must deduct tax at the standard rate from the payments and remit that tax to Revenue.
Claiming relief on buying/selling a house/apartment
How much tax relief will I get?
Tax relief is granted on the amount of the interest paid, subject to the overall limits please refer to Tax Relief at Source (TRS) for Mortgage Interest Relief .
How can I claim the relief?
From 1 January 2002, tax relief for home mortgage interest is no longer given through the tax system but is instead granted at source. This means that your mortgage lender gives you the benefit of the tax relief element on the mortgage interest on behalf of the Revenue Commissioners.
Your mortgage repayment is reduced by the amount of the tax relief. Your lender in turn claims this amount from Revenue. Any future adjustments in the tax relief (for example, arising from changes in interest rates) will be made automatically by the lender on behalf of Revenue. It is not necessary to claim mortgage interest relief in the annual tax return, and it no longer appears on your Tax Credit Certificate. Borrowers who are taking out new mortgages or who wish to claim for relief due for previous years must apply online.
Home Improvement Loans
Can I claim tax relief on a loan for home improvements?
Yes. You can claim tax relief on a loan used by you to purchase, repair, develop or improve your sole or main residence or to pay off another loan (or loans) used for that purpose.
What can the loan be used for?
The loan can be used for most work done on your sole or main residence except for money spent on furniture or removable fittings (e.g. light fittings, curtains, carpets etc.). Examples of what the loan may be used for are:
- Extensions, purchase/construction of garage, garden shed, greenhouse etc.
- Construction of driveway, path etc.
- Conversions, painting and decorating
- Installing central heating
- Rewiring or replumbing (including bathroom suites)
- Replacing or installing windows
- Purchase and/or installation of burglar/fire alarms
- Purchase and installation of bedroom and kitchen units which are affixed to and become part of the building
- Treatment for damp, dry rot, woodworm etc.
- Landscaping gardens (including garden walls)
- Contributions to group water and sewerage schemes.
Selling a House
If I sell my house will I have to pay Capital Gains Tax?
If you sell your home (your sole or main residence) you may be entitled to Principal Private Residence (PPR) relief from Capital Gains Tax (CGT). If the residence (as defined above) has been occupied as your sole or main residence throughout your period of ownership, and PPR relief is not restricted for any other reason, you will be exempt from CGT on the sale. Where the house has a garden of up to one acre (0.405 hectare) this land can also be considered as part of your home for the calculation of PPR relief, the relief will not apply to land in excess of this area. Although in most cases where an individual sells their home full PPR relief will apply, relief may be restricted where the house (or part of the house) has been let or used for business purposes, or where the property has “development value”. Relief may also be restricted where the individual has not used the house as their home for the full period of ownership. However, the last twelve months of ownership may be considered to be a period of deemed occupation for PPR relief purposes, this might be relevant for example where a person has moved into a new home but is still selling their previous home.
Please note that even where PPR relief means that no CGT is payable you will still be required to provide a tax return in relation to the sale.
For further information please refer to Revenue’s Guide to Capital Gains Tax (PDF, 1.74MB)
Other Useful Information
Local Property Tax – Sale / transfer of ownership of residential property
We hope that you find the above information useful. If there are any aspects of which you are unsure, please ask us. We look forward to being of assistance to you in the letting and management of your property.
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