Rental Income 101: Helpful Tips for Calculating Taxes on Irish Rental Income

The 2016 Census revealed that almost half a million Irish households are now rental properties, a marked increase on the 2011 figure.
When commercial rental property is added to the mix, it becomes obvious that the rental sector is a booming one. With demand for property at unprecedented levels, more and more people enter the market as landlords every day.
If you’re new to the business, you might have questions about how to report the tax on your rental income. Like other tax obligations, this can get quite complex.
Read on as we look at the rules and requirements in relation to the taxation of rental income in Ireland.

First Steps

Before you get around to collecting rent and paying tax on it, there are certain things you need to do to stay in compliance with requirements.
If the tenancy is residential, the first step is registration with the Private Residential Tenancies Board (PRTB). This registration will require you to give physical details of your property, as well as information about your new tenants.
Once the tenancy begins, you should keep detailed records of all rental income, as well as any money you spend on the property. This will be vital when the time comes to file your tax returns.

Taxes..

What Tax Do You Have to Pay on Rental Income?

If you’ve never rented out a property before, you might be used to paying only PAYE, PRSI and USC, and having these deducted directly from your monthly pay. With rental income, you’ll have to report your income and the relevant taxes yourself.
The good news is that some of the same taxes apply to rental income as apply to your regular salary. You will have to pay both PRSI and USC on your rental income.
You will not have to pay PAYE. However, you will be liable for income tax, as well as Local Property Tax (LPT) on the property itself.

When Are Taxes Due?

Self-reported taxes are due on or before October 31 each year. The income you report on this date is that which you earned in the previous calendar year.
For example, if you’re filling out a tax return for the October 31 deadline in 2020, you report your income from 2019. 2020 income is not reported until October 2021.
This means that you do not have to file returns in your first year renting out property. However, you will have to register the property as a rental premises with the PRTB as soon as you start using it in this way, as outlined above.

How to Deduct Expenses?

When all your taxes are added up, the resulting figure will be a significant chunk of your rental income. However, you will be able to deduct many of the expenses you incur in relation to the property.
You report all of these expenses on either Form 11 or Form 12, along with your income. The balance will be your tax liability.
Management Fees

Expenses

Allowable Expenses

  • Management Fees: If you employ a property agent or manager to look after your rental properties, their salary will be a deductible expense.
  • Repairs & Maintenance: Any repairs or maintenance work you pay for will count as deductible expenses. However, these have to be carried out during the tenancy.
  • PRTB Registration: The fee the PRTB charge for registration is a deductible expense.
  • Service Charges: Any charges that you pay for your tenants will count as a deductible expense. For example, if you provide WiFi, rubbish disposal or a TV License payment, you can write these off. You should note, however, that this is only possible where you pay these yourself. You cannot claim them if your tenants pay for them.
  • Insurance: Most landlords take out home insurance in respect of their property. This is another allowable expense.
  • Legal & Accounting Fees: There is a range of legal and accounting fees that may arise during the course of a tenancy. Solicitors can help with a variety of different tenancy issues, especially if you get into a dispute with tenants. Accountancy fees can also be written off. That means that, if you choose to enlist our help, you can write off a portion of our fees as a tax deduction.

Ineligible Expenses

  • While most costs that relate to the leasing of your property are deductible, there are exceptions. Some of the most important include:
  • Expenses incurred while the property was not under lease
  • Local Property Tax (LPT)
  • Stamp duty
  • Your own labour​
  • However, these are not always clear-cut exceptions. For example, ongoing renovations to the property may have taken place while it was under lease and continues after tenants left. For a detailed examination of what can and cannot be written off as an expense, you should consult with one of our tax professionals.

Renting Out a Whole Property vs Renting out a Room

Your tax obligations will vary somewhat depending on whether you rent out an entire property or just a single room or area in your home. If you only rent out a room, and your income on the room over the calendar year does not exceed €14,000, you will not have to pay income tax on it.
This is known as “rent-a-room relief.” However, this relief is not available to those who let rooms on a short-term basis via online accommodation booking sites.
This distinction has become increasingly relevant in recent times due to the prevalence of Airbnb.

Meeting Your Tax Obligations Head-On.

  • If you're new to the world of rental income, you might well be a little overwhelmed by the thought of your various tax obligations. For someone who is accustomed to having tax deducted directly from their paycheck, it can all get very confusing. However, once you get used to the various requirements, you'll see that there's nothing to worry about. If you'd like to find out how we can help you to figure out your tax obligations, contact us today.