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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

Example: Tax payable on Rental Property

Rent Received

14400

Less: Expenses / deductions

Mortgage Interest*

7447

Insurance on property

500

Rates

150

Repairs

700

Maintenance

1000

Agency fees

500

Advertising fees

200

Additional misc. expenses

300

Total Expenses

10797

Net rental Income

3603

Less: Capital Allowances on F&F
€10,000 at 12.5%

1250

Net Taxable rental income

2353

Tax  assuming 42% rate

965

* 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)


 


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