Dáil Éireann Debate, Tuesday - 25 March 2014
224. Deputy John Browne asked the Minister for Finance the status of owners of buy-to-let properties who bought during the 2004 to 2008 period in regard to heavy mortgage repayments which are not covered by rental payments; if he will consider restoring 100% tax relief on interest for buy-to-let owners who bought during the period in question as a first step in restoring full relief for all buy-to-lets; and if he will make a statement on the matter. [13353/14]
View answerThis question relates to the interest restriction applying to residential lettings, whereby the deductibility of interest in computing taxable rental income from residential property (insofar as it would otherwise be allowable) is limited to 75% of such interest.
I am informed by the Revenue Commissioners that, regardless of when a buy to let property is purchased, rental income for tax purposes from such property 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.
Where the aggregate of deductible expenses in any year exceed the gross rental income, the amount of the deficit is set against rental profits of the same year from other property. Where there are no other rental profits in the same year, the deficit is carried forward as a rental loss for offset against rental profits in future years.
The 75% restriction on interest on borrowed money used to purchase, improve or repair residential property was introduced in the April 2009 supplementary budget as part of an urgent revenue-raising package aimed at stabilising the public finances.
