Rental Income Tax Returns: Most Frequently Asked Questions
Answers to the most frequently asked questions on rental income tax returns:
If you own Irish rental property, you know that filing and paying your rental income tax is not a simple process. We understand – which is why we’ve gathered 18 of the most common questions asked by landlords on this subject, given them to our experts to answer, and compiled this comprehensive landlord’s tax return guide.
1. What counts as rental income?
While there are a few different types of rental income, the most common is earnings from the letting of a house, apartment, building, office or land.
Other types include:
- easement income, which is earned in exchange for allowing someone to erect advertising signs or have right of way to your property
- income from allowing people to fish or shoot on your land
- income from a conacre letting
- premiums received for leases of non-residential property, such as a warehouse or shop.
2. What is the rental income tax rate?
The rate at which you are taxed on rental income depends upon your tax rate band. The standard tax rate is 20% on earnings up to the standard cut-off rate; any income you collect after this cut-off point is taxed at 40%.
You will also be required to pay PRSI and USC.
3. When is my rental income tax return due?
Most landlords are required to do a self-assessment, which must be completed and filed by October 31st of each year.
If you are a PAYE earner and your rental income does not exceed €5,000, you do not have to do a self-assessment, but you must complete and a Form 12 tax return by October 31st.
4. Do I use Form 11 or Form 12?
If you are required to make a self-assessment and are considered a “chargeable person,” you will use a Form 11.
You will use Form 12 if you have been told to do so by the Revenue Commissioners, or if you are not a chargeable person but still want to pay any tax due on your rental (non-PAYE) income.
5. Does PRSI apply to rental income?
Yes, from 2014, Irish Tax Residents are liable for PRSI of 4% on their rental income profit.
6. Does USC apply to rental income?
The rates of USC are from 2% to 10% – it depends on what other income you have – and must be paid along with your annual rental income tax returns in October.
7. Does taxation apply to rental deposits?
Generally, landlords do not include any rental or security deposits as rental income on their tax returns. However, if you use this money to cover the cost of repairs or other deductible expenses, you cannot also claim this expense as a tax credit.
8. What expenses can be claimed?
Thankfully, there are quite a few expenses that landlords can claim against their total gains, significantly lowering the amount of taxable income. Allowable expenses include:
– Management fees
– Utilities, refuse and other service charges
– RTB registration fees
– Insurance premiums
– Advertising expenses
– Maintenance costs
– Wear and tear.
You will be asked to provide proof for each deduction you claim on your return, so be very careful to save all documentation related to any expenses associated with your rental properties. Learn more about all your allowable expenses as a landlord here.
9. What expenses cannot be claimed?
There some expenses which the Revenue Commissioners do not consider allowable that you will not be able to claim against your income. These include:
– Expenses incurred prior to the property being let
– Expenses incurred after the last letting
– Local Property Tax
– Cost for your own labour when repairing or maintaining the property
10. Can I claim tax relief against my mortgage payments?
The Mortgage Interest Relief allows landlords to claim the interest on their mortgage payments against rental income. You can only claim this relief for periods during which you are registered with the Residential Tenancies Board (RTB).
The percentage of mortgage interest that you will be able to claim against your rental income is dependent upon when the interest was accrued; however, 100% of mortgage interest accrued from 1 January 2019 can be claimed as a tax relief.
11. What are capital allowances?
If you have purchased furniture, equipment or white goods for your rental property, you may be eligible to claim these as Capital Allowances against your rental income. The current allowance is 12.5% of the cost over 8 years.
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.
12. What documentation or records should I keep copies of?
The short answer: EVERYTHING!
We recommend that landlords keep full and accurate records of everything relating to your lettings, even if you don’t think it’s deductible or important. This means keeping track of your lettings, invoices, bank statements, building society correspondences, cheque stubs, work orders and receipts.
As per Revenue Commissioners recommendations, it is good practice to keep these documents for 6 years
13. What if my rental property is being let at a loss?
Sometimes it takes a while to begin making a profit when you’re first starting out as a landlord. If your rental expenses are greater than your rental income, this is considered a rental loss – but don’t worry, you only pay income tax once you start making a profit and after taking off any losses incurred in earlier years.
However, even if you are not making a profit, you must declare any rental income to the Revenue Commissioners by filing a tax return.
14. Do I need to be PRTB registered?
Yes. All landlords are required to register a new tenancy within one month of the tenancy’s start date. The fee is €90 per tenancy; however, you can claim back the full amount of both the initial fee and the sum you paid per tenant as an allowable expense against your rental income on your tax return.
Remember: some expenses are only allowable as long as you are registered with the RTB, so make sure you’re up to date!
15. What is the Rent a Room scheme?
Room relief, exempting that income from tax.
To be eligible to claim this relief, you must meet certain requirement with regard to the letting period, the amount of income you make from this rental and whether the room is in a “qualifying residence.”
The annual exemption limit for 2020 is €14,000 (before deductions). If your gross income does not exceed this amount, if the property is your primary private residence, and if the letting period exceeds 28 consecutive days, you may be eligible for this relief.
16. Is income from foreign rental properties taxed?
The same deductions are available in computing your taxable rental income from foreign properties. If a rental loss occurs on your foreign property, such losses can only be offset against further rental profits on the same property. This means they cannot be offset against rental income on an Irish property.
17. If I am a non-resident landlord, do I need to pay tax on my Irish rental income?
If you are living abroad but own a rental property in Ireland, there are two options for paying rent on this income:
– Your tenant pays 20% of the agreed rent to the local tax office, and pays you the remaining 80%. They then complete a form at the end of the year, which you submit to the Revenue Commissioners as proof of tax paid.
– You nominate a Collection Agent, resident in Ireland, to collect rent and file your taxes on your behalf.
If you are a non-resident landlord and have more questions about how to file your rental income tax return in Ireland, visit our page for Non-resident Landlords.
18. If I sold my rental property last year, do I still need to complete landlord tax returns?
In the year following the sale of your rental property, you do not have to file an income tax return, provided you have no other non-PAYE income from any source. Please note that you may, however, be liable to pay Capital Gains Tax.
If you have a question about your rental income tax return that we didn’t answer here, please do not hesitate to get a quote or contact the experts at taxreturnplus.ie, where you can get your taxes taken care of from €249.