There are two certainties in life, tax being one of them. For many people, the first tax they pay (outside of their pay-cheque) is stamp duty when they buy a property. Here we outline for you the tax implications you might have to deal with as an apartment owner, investor or landlord, or tenant, and you can contact us for more detailed advice if you need it. The information on this page relates principally to residential property, and information on ownership of commercial property can be provided by contacting us with your query.
- Stamp Duty – current residential rates of stamp duty are 1%, or 2% if the purchase price is over €1m. Relief from stamp duty for first time buyers and owner occupiers has now been abolished.
- Mortgage Interest Relief – the value of this relief has decreased dramatically over the past couple or years as governments now seek to ensure that private landlords pay increased levels of tax. The relief is as follows:-
- Rent a Room relief – if you let out a room while you still live in the property, and the payments you receive over the course of a year (including for bills etc) are less than €10,000, then this income may be tax-free.
- Tax relief on service charges – you may be entitled to tax relief on part of your annual service charges. This is subject to maximum relief of €400 at the standard rate of tax which is currently 20%.
- Capital Gains Tax – when you sell your home, relief from capital gains tax is available provided you have lived in the property for the entire period of your ownership (although a period of up to 12 months prior to the sale is allowed). . If you sell your property for more than you paid for it (taking into account fees like legal and estate agents fees, or stamp duty costs) then any gain will be tax free. If, however, you make a loss on the sale of your home, this loss may not be offset against other capital gains that you may have.
When you become a landlord without meaning to
o Stamp duty - . For owners who may previously have availed of First Time Home Buyer’s exemption or Owner Occupier’s exemption, but who subsequently moved out to rent the property, then a clawback of stamp duty might arise. To assess this, you will need a copy of your Lease, and know the date that you first received rent.
o Mortgage interest relief – talk to your tax advisor, as Revenue do not generally accept that where a property purchased for the purposes of being a principal private residence is later rented out that the mortgage interest payable is deductible from rents generated.
Investor / Landlords
- Stamp Duty – as a landlord you would have paid stamp duty on the purchase of a property. If you wish to purchase an apartment as an investment, normal rates of 1% and 2% apply. There are no separate rates of stamp duty for investors.
- Income Tax & mortgage interest relief – mortgage interest (like most other expenses)
- are generally deductible from rents received for the purposes of preparing your tax returns. Government policy in recent years however has been to ‘chip away’ at various forms of tax relief and this has been one of them. Currently only 75% of the mortgage interest you pay can be offset against rents. Many investors particularly will find themselves with tax liabilities on rents that they may find difficult to pay.
- Tax reliefs & government policy – as an investor you are most likely to be aware of the Government’s proposal to abolish or ‘guillotine’ the use of various tax incentives which were granted on residential properties before 2014. While the legislation has been written to bring this into effect (along with other significant restrictions on the use of these reliefs) the results of an economic impact assessment are awaited. There has been significant lobbying against this proposal due to the hardship it would cause for many investors who bought the properties on the basis of the reliefs available. We understand this assessment has been completed and await it’s publication.
- Capital Gains Tax – if you make a gain selling your investment property, capital gains tax will be payable. The current rate of capital gains tax is 25%. If however you make a loss, then this loss can be offset against other capital gains you might have to reduce the tax payable on them. Under tax laws, losses can be carried forward but not back, so it can make sense to plan an orderly disposal of properties when the time comes.
- Tenants tax relief – as tenants are still currently entitled to claim tax relief on rent that they pay, you must provide them with your details, including your PPS number.
Tax relief on rents paid – this relief is available up to ……………….
If you have any queries, or would like to seek advice on tax related matters, contact us directly by phone, email or enquiry form and we will discuss your needs in more detail.