As I understand it, the Deputy’s question appears to concern the provision of a tax deduction from general income equivalent to the amount of taxable rental income arising from the letting out of unsuitable family accommodation in circumstances where the family is renting a property more suitable to their needs. I am informed by the Revenue Commissioners that rental income for tax purposes is the gross rental income less allowable expenses incurred in earning that rent, as specified in section 97(2) of the Taxes Consolidation Act 1997. The main deductible expenses are:
- any rent payable by the landlord in the case of a sub-lease;
- the cost to the landlord of any goods provided or services rendered to a tenant;
- the cost of maintenance, repairs, insurance and management of the property;
- the interest paid on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, is restricted to 75% of the interest and is subject to compliance with PRTB registration requirements for all tenancies that existed in relation to the property in the relevant year); and
- payment of local authority rates.
In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 12.5% per annum of the actual cost of the fixtures and fittings over a period of 8 years.
The effect of the deduction of allowable expenses from gross rent means that the amount of taxable rental income will often be substantially lower than the gross rent, and could be nil. On that basis, it is not clear that a deduction for taxable rental income, if any, arising on the original property would be of particular benefit to the individual.
I am also advised by the Commissioners that the existing scheme of tax relief for rent payable in respect of residential property, which is provided for in section 473 TCA 1997, does not apply to individuals who began renting property after 7/12/2010 and is being withdrawn on a phased basis over the tax years 2011 to 2018.
[It would be incongruous if, while phasing out this relief, I was to introduce another type of rent relief in respect of residential accommodation, the benefits of which would be highly uncertain.]