Rental income is assessed under Schedule D Case V in respect of rents from any premises in the State e.g. the monthly rent from a 10 year lease of a commercial building or the annual rent from an easement.
Crucially rent is charged to income tax on an accruals basis. This means, in effect, that the landlord is taxed on the rent due to him for a period and not just the rent received from the period.
The following deductions are allowable from the gross rent:
- Rent payable.
- Rates payable.
- Repairs, insurance, maintenance and management costs.
- Accountancy fees incurred in preparing rental accounts.
- Certain mortgage protection premiums.
- Interest accruing on money borrowed to purchase, improve or replace the property. It is crucial to note that if any amount of the loan was used for any other purpose e.g. the purchase of a car or improvements to the landlord’s own home that proportion of the loan interest is disallowed.
- Capital allowances may be claimed in respect of expenditure on fixtures and fittings for the investment property at a rate of 12.5% per annum.
If a taxpayer makes a Schedule D Case V loss on a property he can set the loss against his other rental profits or carry the loss forward indefinitely for use against future profits. He cannot use a rental loss against other income arising that income tax year (e.g. salary income).
The standard charge for preparing a rental income and expenditure account in respect of a residential property and filing the income tax return is €400 plus VAT and €50 plus VAT extra for each additional rental income and expenditure account to be prepared.