If you receive any rental income from residential or commercial property in Ireland, you must declare this income to the Revenue Commissioners by filing an Income Tax return. While the process of filing a tax return – and the possibility of owing additional tax – may be daunting, there is a silver lining: allowable expenses.
Allowable expenses are costs that you incur while managing a rental property, which you can then claim against your annual rental income on your tax return, ultimately lowering your tax bill. These deductions are not made automatically when you file your tax return, meaning it’s up to you to know which expenses are allowable and to claim them when the time comes.
Below, we have listed 10 allowable expenses that you, as a landlord, may be able to claim against your rental income tax this year.
1. RTB Registration Fee
Every landlord, regardless of the type of property you’re letting, must register any new tenancy with the Residential Tenancy Board (RTB) within one month of the tenancy start date. Some tenancies are exempt from this requirement, such as holiday and AirBNB lets, and property let under the Rent a Room scheme.
The standard registration fee is €90 per tenancy (late registration will cost you €180), though prices can vary depending on the type of accommodation you provide and the number of tenancies you are registering at one time.
Luckily, any costs of registering a tenancy with the RTB are considered allowable expenses and can be claimed against your rental income on your Income Tax return.
2. Qualifying Mortgage Interest
If you were granted a mortgage for the express purpose of purchasing, repairing or renovating a residential rental property, and your tenants are registered with the RTB, you can claim Mortgage Interest Relief against your rental income tax.
Mortgage Interest Relief allows a landlord to claim up to 100%* of the interest accrued on a qualifying mortgage against their tax bill, provided the property is being rented out or, if you’re in between tenancies, provided the landlord does not reside there during that time.
As of January of this year, landlords who let residential property to tenants receiving certain social housing support may deduct 100% of the accruing interest for a period of three years.
An important note however is that the additional 25% deduction for each year may be claimed only by filing a separate claim to Revenue at the end of the three-year period.
2016 Return: 75% of Mortgage Interest
2017 Return: 80% of Mortgage Interest
2018 Return: 85% of Mortgage Interest
2019 Return: 100% of Mortgage Interest
3. Management & Agent Fees
If you use a property management company to collect rent, manage the property and/or handle tenants on your behalf, you may claim the associated fees as allowable expenses.
This deduction is particularly useful for new landlords or non-resident landlords living abroad, as it means ensuring your property is well-taken care of won’t break the bank. Now that you know these expenses are deductible, you might consider using such a service until you’re more comfortable with your landlord duties or are able to manage the property on your own.
4. Advertising & Estate Agency Expenses
Having trouble finding tenants? Don’t stress!
Any costs that you incur while advertising your property are tax-deductible. This includes print ads in newspapers, online listings such as on daft.ie and even using an estate agency to secure tenants.
If this is your first time renting your property, remember: advertising and legal fees incurred on first lettings are the only pre-letting expenses that qualify for deduction, so be sure to document those costs.
5. Insurance Premiums
Letting out a property comes with an inherent risk, so many landlords choose to insure their rental properties against things like fire and public liability.
If you have any insurance policies in place for the protection of your rental properties, the premiums for these policies can be deducted on your rental income tax return. This includes premiums paid on mortgage protection policies (decreasing term insurance).
6. Legal Fees
If you pay a professional legal service to assist you while preparing your property for letting, these legal fees are deductible. This can be particularly useful for first-time landlords, who may need extra help with tasks such as drawing up leases.
It’s important for first-time landlords to remember that, along with the advertising expenses mentioned in #4, these legal fees are the only deductible pre-letting expenditures. So make sure to document these expenses carefully and save those receipts.
7. Accounting Fees
If you pay a professional to assist you with the accounting requirements for your rental properties, such as preparing your rental accounts, the expenses incurred here are considered allowable with regard to your income tax return.
Not all accountancy fees are deductible, however, so be sure the expenses you are claiming are related to the preparation of a rent account, or they may not be considered by the Revenue Commissioners.
8. Local Service Charges / Utility Bills
If you, as a landlord, incur costs for utilities/services such as waste collection, recycling, or services provided by the local council such as light, heating, internet or phone, you may be entitled to deduct these when calculating your rental income tax liability.
If you require your tenants to pay for these services themselves, however, you will not be able to claim them as expenses.
9. Repairs & Maintenance
Repair and maintenance expenses, such as servicing boilers or fixing broken locks, qualify as deductible so long as they are necessary to keep your property at an acceptable living standard.
In order to claim these expenses, the repairs must be both essential and non-profitable. This means that you can deduct the cost of hiring a contractor to repair a broken step, but you can’t claim relief for your own labour if you fix it yourself.
10. Wear & Tear
Also referred to as “capital allowances,” wear and tear deductions help offset the price of furnishings and fittings if you’re renting a property as furnished. Landlords are currently allowed to deduct 12.5% of these expenses for up to eight years.
For example: You purchased a new cooker for the kitchen in your rental property for €1,000. You can now claim capital allowances of €125 per year for the next 8 years on the foot of this expense.
It’s very important to keep complete records of all expenses pertaining to your rental properties, whether or not they are tax-deductible. Even if you don’t think it will be needed, it’s good practice to keep all records, such as invoices, receipts, bank statements and cheque stubs that relate to your rental property.
We’re here to help!
If you feel as though your rental income tax return is looming over you, believe us – you’re not alone.
Tax Return Plus can help ease the stress and uncover all your eligible deductions, lowering your tax bill and saving you time and money. Whether you’re a first-time landlord or have been in the game for a while, we are happy to work with you to file your rental income tax return this year. Simply get a quote here.