By Liam O’Halloran
IF you are renting out a residence, what should you do about tax?
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.
Register the letting of your property with the PRTB. This is a legal requirement and very important for tax purposes.
Make a list of the cost of all furniture and fittings being provided, how much they cost and when you bought them.
Keep receipts for all expenses incurred in respect of letting out the property eg letting agents’ fees, service charges, prtb registration fee, repairs, mortgage interest certificate, advertising costs, and more.
After the end of the tax year, you must 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.
Regarding the payment of tax on rental income, if you are taxed under self-assessment you must 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 Revenue before the end of October.
If you have rental income and 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.
You also have to pay tax on any Airbnb lettings. The rent a room exemption does not apply so you need to record your expenses and receipts to claim them as a tax deduction against your Airbnb income.
You cannot claim tax relief against rental income for the Local Property Tax.
But you can claim mortgage payments against rental income, but only for the interest part of your mortgage payments. Residential properties must be registered with the PRTB to claim mortgage interest tax relief.
And yes, you can claim tax relief 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 eight tax years. Ongoing maintenance for repairs and replacements can be claimed as a tax deduction when incurred.
What is a replacement for rental income tax relief? This applies for low-cost items that are cheaper to replace than repair eg microwave breaks down, so you buy a new one or a window is broken and you have to put a new one in.
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.
You have to pay preliminary tax on rental income if you pay tax under our self-assessment system. If your rental profit is €5,000 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.
If a tenant damages your property, you can claim tax relief for the cost of repairs, replacements and re-decoration.
• Liam O’Halloran is an accountant with FDC Bandon.