As a landlord, what expenses can I set against rental income?

Can you confirm whether agent monthly letting fees are an allowable item for tax purposes?

Do you have a definitive list of allowable landlord expenses, or can you point me in the right direction?

Mr J McE, email

Letting fees are an allowable expense against rental income before assessing income tax liability.

Getting a specific definitive list of expenses that can be set against rental income is not as easy as it sounds. The Revenue gives a guide to the type of expenses that are allowable, rather than a specific line by line list. It can be found in Leaflet IT70 called A Revenue Guide to Rental Income. But you should take note of some pretty obvious items if you are renting property:

You can claim up to 75 per cent of interest paid on a mortgage taken out to purchase investment property against rental income. There is talk of this being amended upwards to 100 per cent in the forthcoming Budget as the Government looks to address supply bottlenecks in certain areas, but that remains to be seen.

The premium for the mortgage protection policythat you will almost certainly be required by your lender to pay when you take out the mortgage.

Any insurance premiums you have to pay to protect the property.

Management fees, which certainly includes your agent’s monthly letting fees.

Estate agent fees incurred in purchasing the property in the first place (and selling it).

Advertising costs incurred trying to find tenants for your property.

Legal fees that arise in drawing up leases or otherwise directly incurred in letting the property.

The fee for registration with the Private Residential Tenancies Board, which is now obligatory for all landlords, can be set against your rental income. Avoiding PRTB is not an option. Apart from being illegal, it also means you will not be allowed claim relief on mortgage interest.

Once you let out the property, there will be maintenance costs to meet and it is likely that small (and not so small) problems requiring repairs will arise. You can claim for the cost of hiring others to carry out these jobs, but an important exclusion is that you cannot claim for your own time, for instance in cutting the grass and such like.

When it comes time to prepare your accounts for the taxman, you can claim the fee charged by your accountant against rent.

You can claim for service charges, such as bin collection, assuming you are paying them in the first place. However, despite accepting it in principle, the Government has yet to allow local property tax as an allowable expense.

You can also claim for wear and tear. This effectively covers the cost of materials acquired to furnish your rental property. While some landlords will recount tales of furnishings that last only a few years, Revenue will allow such “capital allowances” at a rate of 12.5 per cent per year over eight years. Capital allowances do not cover costs incurred in extending, altering or refurbishing your property. For these you will have to rely on other dedicated schemes like the current home renovation incentive scheme.

That should hopefully be enough to be going on with.

Can I offset CGT gain on house against loss on bank shares?

I recently had to sell a holiday home in the west of Ireland. It was not for profit but for health reasons, as I would be unable to make reasonable use of it in the future. I realise I will be liable for capital gains tax on the profit I made and have to make my declaration by December 31st next.

I am also in possession of bank shares and have made a considerable loss. If I were to sell these shares now, could I offset the loss against the gain I am making in the sale of the holiday home?

Mr HQ, Kildare

Yes, you can. Losses crystallised by selling assets such as shares or property can be offset against capital gains in the same year before assessing liability to capital gains tax.

If the losses exceed the gains, they are carried forward and set against future gains before any tax liability arises.

It’s worth remembering that your deadline for paying any tax due is not December 31st. For gains arising in the first 11 months of the calendar year, you must pay the capital gains tax due by December 15th. Gains made in December must be settled before the end of January.

Bear in mind that you will also be obliged to file a tax return by the end of October in the year following the one in which the gain is made.

Finally, capital gains tax is currently 33 per cent.

REITs and dividends Last week, Mr BD sought information on Irish real estate investment trusts (REITs) which offered the opportunity to reinvest dividends.

Three such entities are listed in Ireland, offering investors the chance to invest in property via a pooled property fund rather than directly buying an individual property.

I mentioned that only one of the three, Hibernia REIT, offered the dividend reinvestment option, which is the case. However, Zurich Life has been in touch to say it offers an Irish investment fund of REITs which reinvests dividends of both Green and Hibernia REITs automatically without any personal decision. Indirect investments of this nature are another approach, although you will need to look at the charges associated with such investments.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.