DOMINIC COYLEanswers your personal finance questions
WHAT DEDUCTIONS CAN I CLAIM ON RENT?
Q
I bought a house some years ago, but moved away recently with my job. I now rent out the house. I was told that I can deduct 15 per cent of the contents insurance value as an expense, thereby saving on my tax bill. Is this true? What is the position regarding furniture?
– Mr E F, WEXFORD
A
According to the Revenue’s guide to rental income, insurance is an allowable expense against rental income. Landlords generally face three forms of insurance. Buildings insurance will cover the cost of reinstating the premises in the case of fire or other physical damage. Landlords can also take out contents insurance, but only on contents belonging to them which remain in the property when it is let. Furniture that you leave in the property during the tenancy would be considered your contents. The final type that landlords should consider is public liability protection.
The 15 per cent figure you allude to is not relevant in the context of insurance premiums. The full cost of eligible insurance premiums is allowable as an expense against rental income before assessing income tax liability. Where the 15 per cent might apply is in relation to capital allowances. In general, an allowance can be made for wear and tear on furniture, fixtures and fittings in a rental property that have been provided by the landlord. Before 2001, the rate for wear and tear was 15 per cent of the cost of the item over the first six years with 10 per cent in year seven. These days, you can claim 12.5 per cent per year over eight years. Retain receipts for anything bought for the property.
There are other items you can claim as expenses against rental income. In general, the Revenue allows expenses “incurred wholly and exclusively for business purposes”. These include management fees, advertising expenses incurred in renting the property, the cost of registering with the Private Residential Tenancies Board, legal fees for drawing up leases and accountancy fees related to the rental. You can also claim for ongoing repairs and maintenance to the property but not for any time spent by the landlord in carrying out such services. If the landlord pays waste/service charges during the tenancy, these too are considered an expense.
Mortgage interest on a loan for the property is also allowable at 75 per cent.
DO EXEMPTIONS MEAN I AM DIRT-FREE?
Q
Exemption from income tax plus an age/disability condition results in a person not being liable for DIRT. Consider a person with a big claim for health expenses (private nursing home) which drives down their income so that their tax liability is zero. Does this put them in the category of exempt from income tax?
– Mr T M, KERRY
A
Your claim for relief for money spent on nursing home care will be dealt with through the Med 1 form. This is a retrospective application for relief of qualifying medical expenses and is relevant for people whose income is above the exemption limit. I do not see how it would allow you to claim DIRT exemption. This exemption depends on the person’s income being less that the relevant income tax exemption limit and their being either over the age of 65 or permanently incapacitated.
This column is a reader service and is not intended to replace professional advice.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com
