Renting a Property in Ireland A Tax Guide for Landlords

If you’re new to renting in Ireland, you might have done some preliminary research into what sort of tax you'll pay but be a bit unsure as to what it all means. So whether you're renting a room in your own home, a separate property or you're a landlord living abroad, we've compiled this overview of the absolute basics with regard to expenses and relief for Irish landlords.

Rent-a-Room

relief If you rent out a room in your own home and earn under €10,000 from the endeavor per year, we have good news for you: That money is tax exempt. You won't have to pay income tax, file a complicated landlord's return, or register with the Private Residential Tenancies Board.

This exemption is called "Rent-a-Room" relief. It's a great initiative for those with a spare room looking to make a bit of extra cash. However, there's a few things you should know before you start.

The exact conditions you need to qualify for Rent-a-Room relief are as follows: The room you're renting needs to be in your own home. If you own more than one property, the room shouldIfbe in your you're rentingprimary a room inplace your own homeYou of residence (i.e where friends or family would expect you for qualifyto forfind Rent-a-Room Relief most of the year). You need to be earning less than €10,000 per year -around €830 per month -from boarders. This is a gross figure and includes any money charged to tenants for bills, utilities, local charges and other expenses such as food. You are entitled to rent more than one room, as long as you're making beneath ten grand in total from all of your tenants.

If you're renting a room in your own homeYou qualify for Rent-a-Room Relief

Note that you still need to file a standard return at the end of the year even if you avail of Renta-Room Relief! Just make sure you declare your earnings in Section 16 of your Form 12 .

As long as you fulfill all these

, s n o i t a Stipul you're

GOOD TO GO! However, it's worth noting that even if you're not a registered landlord and don't have to deal with all the admin it entails, letting is still a huge responsibility for you to undertake.

When Rent-a-Room relief applies, the agreement you enter into with anyone boarding with you you is not an official tenancy agreement., but rather a more informal licensee agreement .

, s t n a n e t for : s n a e m this They are not legally entitled to a rent book, or other such documentation They are not due an official reason for the termination of their tenancy, no matter the length (you should give reasonable notice, however) They can't take disputes that arise with you to the Resolution Centre of the Private Residential Tenancies Board

for you,s: it mean If you're renting a room in your own homeYou for to Rent-a-Room You are notqualify required register Relief with the PRTB tenancies You are not required to maintain the property to the minimum set of physical standards that regular landlords are You're able to terminate tenancies any time at your own discretion, regardless of their length (provided you give notice)

All this might seem advantageous, but if a disagreement arises between you and your tenant, as an unregistered landlord you don't have the Private Residential Tenancy Board to fall back on.

you'll have to go through Small Claims, a process which at times can be neither quick nor pretty.

Therefore, even though it's not legally required of you, it's a good idea to provide boarders with a contract detailing the conditions of their tenancy, and to keep fastidious records.This will help to avoid any confusion or disagreement, and if a problem does arise you'll have the paperwork to prove your stance if it escalates to small claims.

It's a good idea to commit the following essential information to writing and give a copy to your tenants: How much rent is due What date it's due each month How it should be paid (cash, cheque, etc) Any additional costs, e.g. utilities or local fees Conditions relating to the full return of their deposit House rules (if you have any)

Registered

landlords Generally speaking, you’ll pay either 20% or 41% tax on your total rental income, depending on your personal circumstances (marital status, how much you’re charging tenants, whether you have other forms of income, etc). Unless you’re renting in your own home and earning below a certain amount (see Rent-a-Room Relief), you’ll have to register with the Private Residential Tenancies Board and lodge a Landlord’s tax return every year by the 30th October.

HOWEVER YOU'RE ENTITLED TO

OFFSET A NUMBER OF EXPENSES AGAINST THIS TAX ON YOUR RETURN.

THESEEXPENSESINCLUDE:

PRTB Registration Fees Estate Agent Fares Advertising Expenses Local Service Charges Legal Expenses Accounting Expenses Insurance Premiums Repairs and Maintenance Wear and Tear

PRTB Registration Fees involves any expenditure incurred as a

result of first-time registration with the Private Residential Tenancies Board and any further expenses incurred for the registration of tenancies.

Estate Agent/Advertising Expenses any money you spend on publicizing your property, be it through advertising independently or by using the services of an estate agent.

Local Service Charges rubbish collection, recycling, or any

other payments relating to services provided to your rental property by the local council - note you can only only claim on this if you cover these charges, not if you bill them to your tenants.

Legal Expenses

if you’ve paid a professional to provide you with any legal services relating to your property, for example drawing up leases or helping you with Stamp Duty if you've bought a property with the intent of renting.

Insurance Premiums premiums for any insurance policies relating to rental property, including premiums paid on Mortgage Protection Policies.

Accounting Fees any accounting services you've used in relation

to your rental endeavour, from setting up rental accounts to preparing and filing tax returns on your behalf.

While all of the above are extremely handy little breaks if you're looking to save some money, the best opportunity to reduce your landlord tax return comes in the form of Repairs and Maintenance and Wear and Tear respectively.

It works like this: as a Registered Landlord, there are certain legal requirements in place relating to the minimum physical standard of the property you let.

Your tenants are legally required access to: Both a sink and shower/bath, with hot and cold water available through each An effective fixed heating appliance in each room Smoke alarms and fire safety equipment, e.g. a fire blanket Working and hygienic facilities for storing and cooking food (microwave, hob, fridge-freezer) Vermin-proof storage facilities for refuse and rubbish A washing machine A clothes dryer or clothesline These facilities are the basic requirements for your tenants, as well as a structurally sound and secure domicile. Both must be repaired and maintained effectively for the duration of their lease - boilers must be serviced, broken appliances must be fixed, missing roof tiles must be replaced, etc. This should either be carried out by you or an independent hired party.

However, as long as you keep hold of any receipts and only undertake essential (not for profit) repairs and maintenance, you are legally entitled to claim any expenditure towards this end back on your annual returns.

The same principle applies with Wear and Tear Allowance. You can claim Wear and Tear on any furniture, upholstery, or appliances in a property you are renting out to tenants. This includes things like carpets, curtains, dishwashers, suites - basically anything that’s essential to making the place comfortable and liveable. The allowance essentially waives any expenses you’ve undertaken for the sake of furnishing your property against your annual income tax at a rate of 12.5% per year over a period of eight years.

For example, you buy a dining set valued at €1,000 for your tenants.When it comes to filing your return that year, you can claim €125 (12.5%) against your income tax as Wear and Tear for that furniture. You can claim €125 every year for the next 8 years, until the full €1,000 euro you paid for the set has been accounted for. At this point, it’s considered ‘written off’ against rental income, and you can no longer claim back for it. If you do the math, you’ll realise this means you get 100% of your expenditure back – it just takes a little time.

If you’re using second hand furniture, things get

. . . r e i k c i r T e l t t A Li The best way to explain it is to remember that the cut-off point for items being claimed against income tax is eight years from their point of purchase. So if you bought a brand new bed for a tenant, you’d get 12.5% Wear and Tear for eight years, which means you’d eventually get 100% of the amount you originally paid offset against your income tax. However, let’s say you have a desk that you bought two years ago, and only just started renting the property it’s in this year. You’d still be able to claim 12.5% of the desk’s original price on your returns, but because it’s already two years old you’d only be able to claim on it for six years before it’s written off.

In this vein, you’re not entitled to any Wear and Tear on furnishings over eight years old. This is just common sense - if you've had them for that long, they’re probably looking worn and torn enough as it is!

In order to make sure you're eligible for the maximum legal entitlement on your returns,

We can't stress the importance of keeping accurate records! Hold onto any receipts and documentation for purchases relating to your property, and keep them organised.

Remember: When you're filling out your return, you don't need to include receipts unless it's specifically requested of you. however, you should keep all documentation relating to your property dating back eight years.

Non-Resident

landlords If you rent property in the Republic of Ireland any money you make from lettings is still chargeable to the same tax as residents of the State. Your gross monthly earnings are subject to the standard 20% income tax, and you’re still required to submit a return to the revenue every year. However, in terms of paying your tax, the standard practice for non-resident landlords is that your tenants withhold the amount you owe for income tax from their monthly rent and pay it to the revenue on your behalf.

This may seem like a strange way of doing things, but it was implemented as a way of ensuring that these taxes are actually paid by foreign landlords. By placing the responsibility of withholding with tenants, it basically means that the people responsible for any dividends are located in Ireland instead of overseas, and makes the process more straightforward than having to send or receive a return from abroad.

How it works: Say you live in Lyons, and charge €800 a month on a house you’re renting in Cork. Once the tenancy is agreed, you or your tenant would have to contact your local Revenue Office to make arrangements with regard to where your income tax is payable to. Once that’s sorted, every month your tenants deduct 20% from the rent due to you and send this over to Revenue as your income tax. If you’re charging €800, your tenant would pay you €640 and send the other €160 either as direct debit or cheque. At the end of every year, they complete a Form R185 documenting how much has been deducted for tax payments that year, and send it to you for your personal records.

Although the reasoning makes  sense on paper, it can still be a bit  of a hassle for you and those  renting from you. Your tenants are  essentially taking on another  person’s tax responsibilities that  they wouldn’t have to deal with if  they were renting from an Irish  resident, and  If you’re unfortunate  enough to get a tenant who  doesn’t pay those taxes, it can  cause you trouble that might not  be easily resolved if you’re living in  another country. As a result of this,  many landlords chose to use the  services of a Tax Collection Agent.

A Tax collection agent is an Irish resident who collects rent and files your income tax on your behalf. They can be a professional mediator, or just a trusted friend or family member. They will be allocated a second PPS number to be used exclusively when dealing with your property, and basically act as an intermediary whilst you’re abroad. If you use a family member or friend as an agent, you are of course free to complete your own return and then give it to them to file on your behalf.

Using an agent is usually the best course of action for both

Landlords and Tenants. Landlords can access all their due rent (via the tax agent) and tenants don't have the extra responsibility of paying those taxes.

It's also worth knowing that NON-RESIDENT LANDLORDS ARE ENTITLED TO THE SAME EXPENSES AS RESIDENT LANDLORDS. if you pay for a tax agent, you can offset this cost against your annual return.

Whether you're a resident, non-resident, or new to the rental game and need some assistance, at Taxback.com we're always ready to help. We can help you file your Irish Landlord Tax Return quickly and easily and ensure you get the maximum refund you're legally entitled to if you're owed any money by the Revenue. If you just need some advice, our 24 hour chat service is always available to help, or you can drop us an email at [email protected] or call us at 1800 991 805.

Alternatively, you can get in touch with us at our Irish offices: IDA BUSINESS & TECHNOLOGY PARK RING ROAD KILKENNY IRELAND

14 ST. STEPHENS GREEN DUBLIN 2 IRELAND TEL: 1800 991 805 TEL: +353 1 887 1999 FAX: +353 1 670 6963

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