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Here are some considerations for operating as a landlord:
Filing a tax return
As a Landlord earning profits of over €3,174 per annum, you will have to register for income tax and file an annual tax return.
You more than likely will have a tax liability at the end of the year. Out of your mortgage repayments each month, only 75% of the interest is allowed as a tax deduction so even if you feel you are loosing money each month you may still be in a profitable situation in Revenue’s eyes.
Mike is renting out his house. He receives €1,000 per month in rent from his tenant. His mortgage repayment is €1,500 per month, of which €900 relates to interest.
Assuming Mike has no other expenses, his taxable income is as follows:
Rents received (€1,000 x 12 months) €12,000
Less 75% of mortgage interest (€900 x 12 months x 75%) €8,100
Taxable income €3,900
So even though Mike is short €500 per month between what is receiving in rents and what is paying out on his mortgage, he will still be taxed on €3,900 at the end of the year.
From Year 2 onwards you will have to pay some of your tax in advance based on Revenue rulings.
You will loose your Mortgage Interest Relief
By renting out your home, it is no longer deemed your principal private residence and is not a rental property so any tax relief you were in receipt of, you will loose. It is your responsibility to let Revenue know this. A form TRS4 can be filed out and returned to them (available on the Revenue website www.revenue.ie)
The Private Residential Tenancies Board (PRTB) is a government agency. The PRTB operates the national registration system for all private residential tenancies. When you rent out your property you are required to register with the PRTB within one calendar month of the tenancy commencing. A fee is payable for this registration. The fee increases for late registrations. If you do not register with the PRTB you will not be allowed to claim your mortgage interest as a deduction resulting in a very large tax bill.
As a landlord you will be required to have a BER cert for your property.
Local Property Tax (LPT)
As a landlord you will still be required to pay the LPT even if you are not living in the property.
Renting your home from abroad
Some landlords move abroad and rent out what was once the family home. In this scenario your tenant is legally required to withhold 20% of the rent and pay this over to Revenue. You obtain this 20% back from Revenue on submission of your annual income tax return.
The tenant is not required to deduct this 20% if you are using the services of a collection agent, resident in Ireland, who collect the rents on your behalf.
Expenses you can claim for
- Water rates, Ground rent, Service charges, Waste Collection charges etc
- Insurance costs
- Management & rent collection costs
- Advertising costs
- Legal fees relating to drawing up of leases or collection of unpaid rent
- Accountancy fees relating to rental income
- Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property (restrictions apply)
- Repairs, decorating and General Maintenance
- Cleaning & related costs
- Local Authority Property Registration Fees