What expenses and deductions are allowed against Rental Income ?

You can claim expenses and deductions that are allowed under Irish tax law and that are fully related to earning rental income. You can claim capital allowances on the fitting out and furnishing of your foreign rental property.

These include:

• managing the property
• insurance
• repairs
• local authority rates
• interest on loans used to purchase the property
• fitting out and furnishing the property.

Capital allowances

You can claim capital allowances on the fitting out and furnishing of your foreign rental property. The fixtures and furniture must belong to you and be in use at the end of each year that you claim for. You can claim these allowances over eight years at 12.5% per year.

You may sell your fixtures and fittings during the year. If you do, you may be allowed an additional allowance. This is called a balancing allowance. 

Your sale proceeds may exceed the depreciated value of these fixtures and fittings. If they do, there may be a clawback of allowances that you have already received. This is called a balancing charge.

See the example below:

Mortgage interest relief

You can claim mortgage interest relief against your rental income. The interest must be from a mortgage used directly to buy, improve or repair your rental property.

From 1 January 2017, you can claim 80% of the interest paid. For earlier years, it is 75%.

If you buy the property through a company you cannot claim a deduction for interest payments. This is because the mortgage has been used to purchase an interest in the company and not to purchase the property directly.

Can you claim interest relief from the time that you take out the loan?

You can only claim for interest that is paid during the time the property is let. This means you cannot claim for interest paid:

• between the time you purchased the property and the time you first let it
• between lettings where you or others stayed in the property rent free.

What expenses and deductions are not allowed?

What expenses and deductions are not allowed?

You cannot claim:

• pre-letting expenses
• post-letting expenses
• capital expenditure
• the cost of your own labour if you carry out repairs to the property.

You can only claim expenses for the term of a lease. The exceptions to this are expenses such as letting fees, advertising fees and legal fees before the first letting.

You cannot claim expenses or deductions for any time that you or others stay in the property rent free. You must divide the expenses and deductions between that period of time and the time that it was rented out.

Why are pre-letting expenses not allowed?

You can only make a claim for expenses during the term of a lease. You cannot claim interest payments between the time you bought the property and when you let it out.

Expenses, including interest payments between lettings, are allowed as long as you do not live in the property at that time and re-let it later.

Can you claim travel costs such as airline tickets and car hire?

You can only claim for the cost of travelling to your property if the journey is undertaken wholly and exclusively for the purpose of earning rental income from the property.  

You cannot claim for private travel costs where you or your family also use the opportunity to take a short break, a holiday or to view a property you do not own and let.