If an individual rents a room in his/her Private Dwelling House (PDH) and the gross income including monies for food, laundry or similar goods and services etc. , does not exceed €14,000, then this income will be exempt from Income Tax. However, where the income exceeds €14,000, the entire amount is taxable.
The relief is available to individuals only and does not apply to companies or partnerships. However, it applies where individuals have joint income (for example husband and wife where there is no partnership) and where the income can be divided between the individuals concerned. It should also be remembered that the Revenue Commissioner seeks to deny the rent-a-room benefit to short term guests staying in your PDH such as the case with Airbnb guests. In some cases the point can be debatable because as such the word “residential” is not defined in Irish tax law.
Rental income from a property in the Republic of Ireland (“the state”) is chargeable in accordance with the provisions in Case V Schedule D Taxes Consolidation Act, 1997. Rental income received from properties outside the state is chargeable in accordance with the provisions of Case III Schedule D TCA 1997.
In calculating Case V income what is allowable:
- Repairs and maintenance to the property carried out during the tax year.
- Mortgage interest accruing, however, this is restricted to 75% of the interest accrued in the tax year. As and from 1st January 2016 100% is allowable if the property is let to tenants who are in receipt of certain social support schemes.
- Insurance on the property in the tax year.
- Legal fees in the tax year.
- Cost of providing any services or goods to your tenant for which you did not receive separate payments in the tax year.
- Wear and Tear of fixtures and fittings is allowable at 12.5% in the tax year.
Rental Income in accordance with Case V is calculated by taking gross rental incomes less expenses and capital allowances.
Full and accurate records of your rental properties must be kept. It is also important that all supporting documents and records such as invoices, bank statements, cheque stubs, interest certificates and these records should retained for a period of six years.
Home Renovation Incentive (“HRI”)
The home renovation incentive allows homeowners and landlords alike to claim an Income Tax credit in respect of repairs or improvements to a main residence or rental property by a HRI qualifying contractor, you must also ensure that the contractor hold a current Tax Clearance Certificate. The incentive applies to qualifying work carried between 25 October 2013 to 31 December 2016 for homeowners and 15 October 2014 in respect of landlords.
Capital Gains Tax (CGT)
The current rate of Capital Gains Tax (CGT) is 33% and applies to the gain arising from the disposal of assets which are:
- Investment Property
CGT only applies where a gain is achieved on the sale of an asset, if there is no gain then no CGT applies.
Persons chargeable – Individuals, trusts and unincorporated bodies are chargeable to CGT. However, capital gains of companies are chargeable to corporation tax.
Personal Exemption and Relief – The first €1,250 of a chargeable gains of an individual is exempt, however, the exemption is not transferable between spouses and/or civil partners.
Selling Your Business – If you are contemplating selling your business as a going concern and you are aged between 55 and 65 years (inclusive) there is an exemption relief where the value consideration is less than €750,000. If, however, you are over 65 the limit is reduced to €500,000.
Capital Acquisitions Tax (CAT)
Capital Acquisitions Tax (CAT) also known as gift tax or inheritance tax was introduced under the 1976 Tax Act. The current rate is 33% and the calculating threshold is €280,000 and gifts or inheritances between spouses is exempt.