Top 50 Tax Questions

The Top 50 PAYE, Rental Income, Self Employed, Tax Credit and Deduction questions answered by our Expert Tax consultants in an easy to read question and answer format.
Click on each of these headings for a list of questions. A more detailed tax library is available here: Expert Tax Library

The Top 50 Q & A’s about on Tax Advice Property Rental Income

Answered by our Tax consultants in an easy to read question and answer format.

A more detailed tax library is available here: Expert Tax Library

Q1. I am renting out my residence. What should I do about tax?

a. If you are getting mortgage interest tax relief at source (MITRS) on your mortgage, get onto the Revenue and cancel it. You cannot claim MITRS when renting out your property.

b. Register the letting of your property with the PRTB. This is a legal requirement and very important for tax purposes.

c. Make a list of the cost of all furniture and fittings being provided, how much they cost and when you bought them.

d. Keep receipts for all expenses incurred in respect of letting out the property e.g.: Letting agents’ fees Service charges PRTB registration fee Repairs Mortgage interest certificate Advertising costs e.

After the end of the tax year you have to tell the Revenue about your rental income. You will have to complete a simple Profit and Loss Rental Account and make a claim for the furniture and fittings provided. Our Rental Income calculators and recorders can do all of this for you.

Q2. I am renting out my residence and moving abroad. What should I do about tax?

a. If your tenant is paying your rent into a foreign bank then they should be deducting tax at 20% from the rents. Even if they are paying into an Irish bank and the tenant knows you are non-resident they should also take off 20% for tax. The tenant then pays the 20% tax taken out of the rent to the Revenue, who give you a credit for it. You will get a refund of the tax taken by the tenant if you do not owe it to the Revenue. This is why it is very important for non-resident landlords to keep their tax returns to the Irish Revenue up to date.

Q3. What do I pay tax on when renting out a property?

a. You pay tax on your rental profit which is calculated by deducting all tax allowable expenses from your gross rent e.g.: Gross Rents for Tax Year: 12,000 less Expenses- Mortgage Interest: 8,000 (only 75% allowed for residential property) Insurance: 500 Repairs: 1,000 Total Tax allowable Expenses: 9,500 so Rental Profit= 2,500 ( gross rents 12,000 – expenses). The rental profit is added to your other income and you pay your tax on it at your top tax rate. For 2014 you will also have to pay PRSI and USC on the rental profit.

Q4. When do I pay tax (if I owe any) on rental income?

a. If you are self-employed or rental income is your main source of income then you pay your tax once a year in October. If PAYE is your main income then if the amount of tax owed on your rental income is not large it may be collected through the PAYE system. If not, you will have to pay in October each year under the Self Assessment tax rules.

Q5. What is the PRTB?

This is the Private Residential Tenancies Board.

Q6. Why do I have to register with the PRTB?

It is a legal requirement and you must register each residential letting with them. If you do not register you cannot claim tax relief for mortgage interest against your rental income.

Q7. Can I claim tax relief on the PRTB fee?

Yes, the registration fee is a tax deduction from your rental income.

Q8. What is the NPPR levy?

This is the annual levy on second homes and residential rental properties. The levy applies to each separate property. It has been replaced by the Local Property Tax for 2014 onwards.

Q9. Can I claim tax relief against rental income for the Local Property Tax?

Unfortunately not.

Q10. Can I claim tax relief for the NPPR levy?

Unfortunately not.

Q11. Do I have to pay PRSI on rental income?

No for years up to 2013 if you are a PAYE earner and have no self employed income or salary liable for PRSI class S. If you do not have a PAYE income source then you must pay PRSI on your rental profit. From 2014 onwards everybody is liable for PRSI on rental income profit.

Q12. How much PRSI do I have to pay?

If liable for PRSI 4% of your rental profit.

Q13. How do I pay it?

Along with your annual income tax payment under the Self Assessment tax rules.

Q14. Do I pay USC (Universal Social Charge) on Rental Income?

Yes.

Q15. How much USC do I have to pay?

It depends on what other income you have. The rates of USC are from 2% to 10%. You will pay USC at the top rate applicable to your income.

Q16. When do I pay the USC on rental income?

Along with your annual income tax payment every October.

Q17. How does this work if I am a PAYE earner?

If the amount owed is very small the Revenue may not bother collecting it. Otherwise the Revenue will put you into the Self Assessment tax system and you will pay what is owed once a year.

Q18. Is there any difference for tax purposes between a residential property and a commercial rental property?

Yes. A residential property is worse off for income tax as only allowed claim 75% of mortgage interest as a tax deduction, compared to 100% for commercial properties. However for Stamp Duty the rate for residential properties is only 1% compared to 2% on a commercial property.

Q19. Why is the date of first letting so important?

Because you cannot claim tax relief for any expenses incurred before the date of the first letting e.g. mortgage interest.

Q20. If I have a loss on one property can I offset it against another?

Yes, provided they are all Irish properties. Alternatively rental losses can be carried forward to later years to offset against future rental profits.

Q21. If I have a loss on a foreign property can I offset it against a profit on an Irish property?

No.

Q22. If I have two foreign properties, e.g. one in France and one in Spain, with a loss on one and a profit on the other can I offset one against the other?

Yes, all foreign properties outside the Republic of Ireland are lumped together regardless of what country they are in.

Q23. If I pay tax on a foreign property can I claim it against my Irish Tax?

Possibly, it depends on responses to the following: (i) You must be paying Irish tax on foreign property rental profits. (ii) The foreign tax must be an Income Tax charge and not some form of rates or property tax. (iii) Ireland must have a double taxation agreement with the country concerned.

Q24. How are rents from foreign properties taxed in Ireland?

On the same basis as Irish properties. You pay tax on your rental profit which is calculated by deducting all tax allowable expenses from your gross rent e.g.: Gross Rents for Tax Year: 12,000 Expenses- Mortgage Interest: 8,000 (only 75% allowed for residential property) Insurance: 500 Repairs: 1,000 Total Expenses: 9,500 Rental Profit: 2,500 (This is what you pay your tax on)

Q25. Can I claim mortgage payments against Rental Income?

Yes but only for the interest part of your mortgage payments. For residential properties you can only claim 75% of the mortgage interest. For commercial properties you can claim 100%. Residential properties must be registered with the PRTB to claim mortgage interest tax relief.

Q26. Are holiday homes residential properties or commercial properties for tax purposes?

The Revenue treat holiday homes as residential homes and the 75% mortgage interest restriction applies to them.

Q27. If I sell a property at a loss can I claim the loss against my rental income?

Unfortunately not. The loss can only go against other capital gains.

Q28. If my spouse has a loss on a rental property can I claim it against a rental profit on one of my properties?

Unfortunately not.

Q29. What happens if I am letting out my property at a loss?

You only pay income tax when you start making a profit and after taking off any losses incurred in earlier years. Even if you are not making a profit you must still tell the Revenue about your rental income.

Q30. How much tax do you pay on rental income?

It depends on your tax rate and if you have to pay PRSI and the USC levy. You will pay income tax on your rental profit at either 20% or 41% whichever rate applies to you. You will pay PRSI at 4% if it applies. You will pay the USC at whatever rate applies to you, most likely the 7% rate.

Q31. What tax relief can you claim for furniture costs and ongoing maintenance of a rental property?

The initial fit out costs for furniture, appliances etc are allowed at a rate of 12.5% per annum for 8 tax years.  Ongoing maintenance for repairs and replacements can be claimed as a tax deduction when incurred.

Q32. What is a repair for rental income tax relief?

A repair is when you fix something e.g. a repair to a washing machine.

Q33. What is a replacement for rental income tax relief?

This applies for low cost items that are cheaper to replace than repair e.g. microwave breaks down so you buy a new one or a window is broken and you have to put a new one in.

Q34. What happens if a tenant trashes your property?

You claim tax relief for the cost of repairs, replacements and re-decoration.

Q35. Can you reclaim Vat on rental property expenses?

No but if you registered for Vat before 7/4/2007 for property lettings you can.

Q36. Can you claim for expenses if a tenant leaves and the property is empty for a few months?

For tax purposes you still claim the full annual costs incurred on the property provided it will be re-let once a tenant is found.

Q37. If I am registered for Vat for any rental property and I am selling the property, what happens?

It depends on how many rental properties you have registered for Vat and if you are selling for more or less than what you paid for the property. If selling for more than your original purchase price then cancel your Vat number before you sell and repay the Revenue the balance of Vat owed to them out of the original Vat refund. Then there is no Vat on the sale proceeds.

Q38. How do I claim for unused Section 23 losses?

Unused ‘Sec 23’ losses should be included in your opening rental losses figure which automatically goes against rental profits for later years.

Q39. What about these new rules restricting the use of unused Sec 23 relief?

The original proposals for restricting Section 23 relief were never introduced. The relief continues as normal.

Q40. If my rental profit is covered by losses from earlier years do I have to pay tax?

You will not pay income tax but will have to pay the USC levy and PRSI.

Q41. Can I claim tax relief for a mortgage protection policy on any rental property mortgage?

Yes, provided it is a death only policy. The annual costs of the premium qualify as a tax deduction against your rental income.

Q42. If I took a mortgage on my residence to buy a rental property can I claim mortgage tax relief against the rental income?

Yes, as the mortgage was used to buy your rental property.

Q43. Do I have to pay Preliminary Tax on Rental Income?

Yes, if you pay tax under our Self Assessment system. If your rental profit is €3,174 or over you are automatically treated as a self assessment tax case and the onus is on you to complete tax returns and pay whatever tax is owed on time.

Q44. If I have rental income when must I complete a tax return?

If you are taxed under self assessment you have to complete a tax form every year no later than the end of October to avoid penalties. If you are a PAYE earner then you should complete a tax return F12 every year and send it to the Revenue before the end of October.

Q45. Can I claim the cost of my subscription to Paylesstax as a tax deduction against my rental income?

Yes.

Q46. I rent out an apartment. Can I claim the annual service charge as a tax deduction?

Yes.

Q47. How long do I have to keep records of my rents and expenses for the Revenue?

You must keep detailed records for the 4 previous tax years.

Q48. Should I use a separate bank account for my rental income?

Yes we recommend this as it makes it easier to keep track of rents and expenses.

Q49. What will the Revenue look for if I am under Revenue audit?

They will want to see copies of your leases, receipts for all your expenses, evidence of your PRTB registrations and copies of your bank statements and rental accounts.

Q50. Do I have to pay tax on rental deposits?

No, but you cannot claim a tax deduction for when you return them. If you do not return the deposit you must then treat it as rental income and claim tax relief for any associated expenses incurred.