Rental Income:- A taxation guide re Residential Lettings
A person who has rental income has to make a tax return each year and include this income in his/her Income Tax return. The tax return for 2019, for example, must be submitted between 1 January and 31 October, 2020.
The following are the main items which are allowable as a deduction to reduce Income Tax liability:-
- Interest [see later]
- Management charge
- Legal costs [arranging letting]
- Private Tenancy Board costs
- Light & Heat paid by landlord
- Repairs [see later]
- Any other costs that relate to keeping the property in a lettable condition.
- All residential lettings must be registered with the Private Tenancy Board. Details at www.prtb.ie. If this is not done, the interest is not allowable as a deduction. If interest is not allowable, then a sizable tax bill can follow
- Only 75% of interest is allowable as a deduction.
- The capital repayments is not a deduction against Income Tax.
- Capital Costs, eg a new roof, new doors and windows are not allowable as a deduction against rental income. Rather these costs are added to the original cost of the property and this becomes the base costs for Capital Gains Tax
- Rental properties need to have an energy rating, called a BER certificate.
- Where new equipment is bought for the property, 12.5% is allowed for each year over 8 years as a deduction against rental income. Examples:- washing machine, bed etc.
- Local Property tax [previously NPPR] must be paid in respect of each rental property.
- Water charges will be introduced shortly.
- Keep all relevant receipts.
- Ensure that the insurance in place is specifically for rental properties.