YOUR RENTAL PROPERTY

Budget 2020 did nothing to ease the high tax bills crippling many small individual landlords. “Although there is often a picture painted of rich landlords charging exorbitant rents, the reality for a lot of landlords is that their properties have not recovered from the negative equity suffered during the downturn,” said Deloitte’s Alison McHugh.

Such landlords often have little choice but to hold on to those properties — until they emerge out of negative equity. “In the meantime, these landlords are paying high levels of income tax, universal social charge (USC) and PRSI on rental ‘profit’ — which is in reality only a paper profit, as the rental income is often not sufficient to meet the expenses arising on the property,” said McHugh. “To help ease this burden, we would like to see relief being available for local property taxes payable on rented properties.”

Deloitte also believes that individual landlords should be able to get relief from USC when claiming capital allowances against their rental income. Currently, individual landlords can claim certain capital expenses against their rental income to reduce the amount of income tax and PRSI they pay.

However, landlords cannot claim relief from USC when claiming capital expenses against their rental income — USC is charged on the amount of rental income received before a landlord deducts capital allowances.

Budget 2020 did extend the Living City Initiative (which offers tax relief to owneroccupiers and landlords who incur costs refurbishing or converting residential properties in certain areas) until 2022. But many won’t own homes which qualify for it.

If you’re a landlord struggling with high tax bills on rental income, write as much eligible expense off your tax bill as you can — and fully claim mortgage interest relief on your investment property.