Landlords paid tax on 59% of rental income in 2016

Residential landlords paid tax on just 59 per cent of their rental income in 2016, claiming total deductions of some €1 billion, according to new figures. This is the first time the Revenue Commissioners have been able to provide such a breakdown on rental income.

The figures come as Budget 2019 fast-tracked a relief for landlords that will allow those with loans or mortgages on their rental properties to deduct 100 per cent of interest paid on these loans against their tax bills. In 2016, landlords were only able to deduct 75 per cent of interest, with a total deduction of €388 million for that year, new Revenue figures show.

In 2016, some 193,077 “tax units” – the Revenue counts taxpayers in units, which includes jointly assessed couples – declared gross rental income of some €4.2 billion. This is up by about 5 per cent in value terms on 2015, with almost 10,000 extra taxpayer units declaring this source of income. The figures do not include income earned on a foreign property, or rental income declared on corporation tax returns.

This year for the first time, the Revenue has given a separate breakdown on income derived from residential and that derived from commercial. This is as a result of a new question inserted in Form 11 last year, asking landlords for the source of their rental income and the number of properties they let out.

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Residential properties

It shows that almost two-thirds, or 62 per cent, of gross rental income came from residential properties, at about €2.6 billion. This translates to 145,000 taxpayer units, which suggests that more than a quarter of taxpayers filing a Form 11 have rental income from a residential property.

Of this income of €2.6 billion, landlords offset some €1 billion in allowable expenses against their tax bills, thus reducing their taxable income by about 41 per cent. These expenses include “other costs”, such as insurance, property maintenance, and Residential Tenancies Board registration of €399 million; loan interest (€388m); repairs (€263m) and section 23 relief (€15m). Section 23 relief is only allowed where 2016 is the first year of claim.

The figures suggest that a landlord with income of €1,500 a month, or €18,000 a year, would have claimed deductions of about €7,380 against this income, leaving taxable income of €10,620. This income is then liable to income tax, at either 20 per cent or 40 per cent, PRSI and USC.

Commercial income

The Revenue has also provided a breakdown on individuals reporting commercial rental income, which show a slightly lower rate of allowable expenses being claimed.

In 2016, some 64,000 taxpayer “units” had rental income of about €1.6 billion from Irish commercial properties. When it comes to how their tax bill was defrayed, Revenue figures show that about 40 per cent, or some €634 million, was claimed by these income earners in allowable expenses, indicating tax was only liable on about €966 million of the total €1.6 billion in commercial property income reported.

Expenses claimed included allowable interest (€301m); other expenses (€182m); repairs (€76m); and exempt farm leasing (€75m).