5 Tax saving tips for landlords

  1. Keep receipts for ALL allowable expenses, In practise we find some clients aren’t careful about keeping receipts, This means they have less tax deductible expenses and end up paying more tax.
  2. Have a system for recording your expenses. It’s very easy to snap a photo of a receipt / invoice using your phones straight into evernote or wave which will ensure you have all documentation when it comes to tax return time.
  3. Ensure you’re registered with the PRTB – Regardless of the legal issues of not being registered if you’re not registered you can’t claim relief on interest paid on your mortgage. This could be a significant tax saving.
  4. Mind your losses – This is an error I’ve seen numerous times, rental income losses can be rolled forward to future years profits. Keep a schedule of your losses and ensure you are claiming the relief.
  5. Keep a list of the contents in the property – Wear and tear can be claimed on most of the assets inside the rental property  but to claim this wear and tear you must have a proper schedule showing purchase price, date of purchase and previous wear and tear claimed.

We can file your rental income tax return from as little as €200 for further details please contact us on info@domybooks.ie



Tax on Spanish Rental Income

Irish residents with Spanish rental property must make two income tax returns one in Spain and one in Ireland

Tax Residency

You are considered tax resident in Ireland if you spend at least 183 days here per year or 280 days over a two year period.

As an Irish tax resident and Irish domiciled person you are liable to tax on your worldwide income and gains. Therefore, if you own and rent a property in a foreign country you are liable to Irish income tax on the rents you receive and Irish capital gains tax on the gain if you decide to sell the property.

In other words, as an Irish resident, no matter where your property is situated, if you receive rental income or you make a gain on the sale of your property – you are always assessable to tax in Ireland.

Non resident landlords in Spain pay income tax at the current rate on gross income, Unlike Ireland there is no deductions for expenses or allowable interest.

In Ireland the landlord files an income tax return as normal taking the Spanish rental income and deducting allowable expenses. We can then take a credit of the tax paid in Spain.

Losses on foreign rental income can only be carried forward against future profits, Not used against Irish income.

For further information please do not hesitate to contact us on ralph@domybooks.ie or 01-4800531

Why I want to be a landlord

Taken from http://www.reuters.com/article/2012/04/04/us-personalfinance-realestate-landlords-idUSBRE8330T720120404

The first call my husband and I made after closing in March on a two-family house in Brooklyn, New York, was to a rental agent. We were becoming landlords and we wanted to get tenants into the ground-floor apartment before our first mortgage payment was due.

After hearing throughout the housing downturn about the problems of “reluctant” and “accidental” landlords who rented because they couldn’t sell, we found ourselves among a new breed of homeowner: post-bubble opportunists.

For us, today’s market is downright rosy because of declining and flat real estate prices, interest rates near their historic lows, favorable tax breaks and strong growth in rental income. We are swelling the ranks of homeowners who claim rental income on their personal tax returns – 9.3 million in 2009, the last year figures were available from the Internal Revenue Service, up from 8.3 million in 2003.

“People are out there actively trying to buy properties,” says Tara-Nicholle Nelson, real estate broker, attorney and founder of the Rethink Real Estate website(RethinkRealEstate.com). “Prices are not just dropping, but staying low. Interest rates are not just dropping, but staying low. And former homeowners aren’t able to buy,” so there are more people looking to rent.

Some would-be homeowners may find that buying a home and renting it out for a while before moving into it is one way to afford a home they couldn’t otherwise carry. For those with second homes, short-term rentals could cover costs while they’re not using it.

“Today, there are people who never intended to be landlords, but they are saying, there is a demand, the economy is moving, and I need to move, so I’m going to turn my real estate into an investment,” says Kimberly Smith, who operates two business that deal with corporate rentals: AvenueWest Corporate Housing and Corporate Housing by Owner (CHBO; CorporateHousingByOwner.com).

One of her clients, Kinsley Hamilton, owns a two-bedroom loft in Denver, but rents it out for short-term leases and lives 13 blocks away in a shared house. The rental income now covers her $1,350 mortgage and she pays only $400 a month to live down the street. The 28-year-old website developer says, overall, she’s an extremely grateful landlord.

“It comes with responsibilities that I wish I didn’t have to have, but it’s a lot better than the alternative of foreclosure or debt,” she said.

While the dynamics of the recent housing decline make now a particularly good time to jump in, wait any longer and things could change.

“We think housing values will drop more and hit a definitive bottom in early 2013 and rents will go up again in 2012,” says Stan Humphries, chief economist at Zillow, which just launched a weekly Rent Index because of the growing demand for information about rents (link.reuters.com/fug37s).

“But you’re going to see another flip as you go forward now,” cautions Mark Steber, Chief Tax Officer with Jackson Hewitt Tax Service.

He and Humphries foresee a time when housing prices recover, interest rates creep up and rents level off or fall.

The situation leaves most new or prospective landlords with a lot of questions. Here are answers to the most common ones:

1. How do I screen tenants?

Don’t go by your gut, says real estate consultant Danielle Babb, a landlord of four properties.

“I’ll tell people to look at the car they are driving up in. If it’s dirty and messy, take note,” she says.

She also says to ask for a canceled rent check from their current landlord and to make sure that references are not just friends who have been prepped. She usually points people to the Landlord Protection Agency (thelpa.com) to get essential forms and find out how and when to do background checks.

2. What can I charge?

Babb points to a website called Rentometer.com, where people list their apartment rents so users can compare. Zillow’s Rent Index provides details down to the zip code level of average rents. After you crunch the numbers, be patient, says Smith, of CHBO. She says that her own personal rental properties had a negative cash flow from 2008-2009, but that rents have picked up and she is now in the black.

3. What if things go wrong?

One hedge against damage is a rental property insurance policy, which differs from a homeowners policy mainly by having coverage for the structure, but not for the personal property inside – which means a landlord should encourage tenants to get their own renter’s policy for their personal items.

“It also can provide fair rental value, so if you have a tenant in the house and there’s a fire, the insurance will cover lost rental income,” says Eric Vaith, who sells these policies for USAA.

Since his clients mostly are associated with the military and many owners rent out their houses when they change assignments, the company has doubled sales of rental property insurance policies in the last two years.

But note that insurance will not cover for tenants who simply don’t pay, or extended vacancies when you can’t find a tenant. For those, you need cash on hand to cover the mortgage on your own.

4. What do I file on my taxes?

Schedule E will be your friend once you are a landlord.

“You need to keep receipts for all of your expenses. You also have to take depreciation on the residence,” says Lindsey Buchholz, lead tax analyst for H&R Block.

Those at qualifying income levels, below $150,000 for a married couple filing jointly, can actually take a loss off their net income, lowering their tax burden even more than just with the real estate tax and the mortgage interest deductions. In 2009, the 9.3 million filers racked up about $267 billion in rental income, but those filers actually claimed more than that in expenses and depreciation, with the net difference being $11 billion in total losses.

“You wouldn’t want to become a landlord just for income-tax reasons,” says Jackson-Hewitt’s Steber.

But for new landlords like us, those tax benefits are going to make us extremely happy every April.

Allowable expenses against rental income

Rental Income

When preparing tax returns I often have to remind my cli

ents that they may not be claiming for all allowable expenses against their rental income.

I have  prepared a checklist which may assist landlords in ensuring they are claiming for everything they should. Remember all expenses should be wholly and exclusively for the business purpose and not of a capital nature.

  • Accountants Fees (For preparing rental accounts)
  • Advertising fees for advertising the property. (Invoice from Daft or a local newspaper)
  • Rates and levies (Water rates are often missed)
  • Repairs (These should not be of a capital nature)
  • Refuse charges
  • Insurance on the property
  • Management fee’s (Example the actual cost of collecting the rent)
  • Services paid for by the landlord (Examples: Gas, Electricity ect)
  • Wear and tear on fixtures and fittings (Example: Carpet, cooker, central heating)
  • Maintenance Costs (Landlord can not charge for her own time so its worth while paying someone to cut the grass or clean the apartment in between tenants!)
  • Interest paid on loans to purchase, repair or improve the property. (75% allowable, Everyone claims for their mortgage interest but a lot of landlords forget to claim for the interest on loans the may have on repairing the property)
  • Legal fees to cover the drawing up of leases or the issue of solicitors letters to tenants who default on payment of rent.
  • Certain mortgage protection policy premiums with

This list is obviously not conclusive.

If you would like one of our Tax experts to prepare your rental income tax return from as little as €195 please contact us now on 01-4800531

Rental Income

Non Principal Private Residence (NPPR) Charge

It has come to my attention that the Revenue Commissioners are taking the view that this €200 charge is not deductible in calculating tax on any rental income from the property.

Double taxation?