Irish Property Investors - Tax on investment property:

Tax & Tax Relief on rental income:
Generally speaking, rental income is treated in a similar way to your normal income from work, and is taxed at the same rates - for most investors, the tax on rental income would be charged at 41%.

Reduce you tax liability - claimable expenses:

• Interest paid on the money borrowed to buy the property
  
• Rates (if Applicable)
  
• Insurance, management fees, repairs, maintenance etc
  
• Advertising and Agency fees
  
• Capital Allowance of 12.5% of the value of fixtures & fittings in years 1 - 8.
  

These deductions, will help minimize the tax that you have to pay on your rental income, which generally speaking, makes property investments very tax efficient.

Tax on selling the property - Capital Gains Tax (CGT):
When you sell an investment property, you are liable for CGT on the taxable proceeds at 20%. Example: If you buy a property costing €200,000 & later sell the property for €300,000, you are liable for tax on the ‘gain’ i.e. (sale price – original purchase price = ‘gain’). Therefore, in this example, you would pay CGT on your €100,000 gain at 20%, resulting in €20,000 tax.

Taxes - Example

* For the purpose of this illustration, we assumed a repayment mortgage of €180,000 over 20 years, with an interest rate of 4.1%

Other articles to read:
VAT Implications for Investment Property  - Ernst & Young – Ger Manning

Revenue guide to rental income (PDF Download)