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Dáil Éireann Debate, Tuesday - 22 March 2016

Tuesday, 22 March 2016

Questions (75)

Finian McGrath

Question:

75. Deputy Finian McGrath asked the Minister for Finance his views on correspondence concerning accidental landlords and additional income (details supplied); and if he will make a statement on the matter. [5037/16]

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Written answers

The Deputy will be aware that landlords are liable to tax on their net rental profit after deduction of allowable letting expenses, and not on the gross rental income received.  As regards properties that are rented, a landlord may be allowed a deduction of 75% of the interest paid on borrowed money used to purchase, improve or repair rented premises when calculating rental income. There are also a number of other allowances and deductions available to reduce the tax on rental income paid. These include, for example, the cost to the landlord of any goods provided or services rendered to a tenant and the cost of maintenance, repairs, insurance and management of the property.

The Office of the Revenue Commissioners has published a guide to the income tax treatment of rental income. It sets out the amount of rental income to be taken account of for income tax purposes and provides a comprehensive list of expenditure items that are allowable for deduction in computing rental income for tax purposes. This guide is available at:

http://www.revenue.ie/en/tax/it/leaflets/it70.html.

The Deputy may also be aware that in Finance Act 2015, I introduced a new relief which will allow a full 100% mortgage interest deduction where a landlord undertakes, for a period of at least three years, to provide accommodation to tenants in receipt of social housing supports and registers such undertakings with the Private Residential Tenancies Board within certain time limits. Further information on this relief is available in section 97 of the Revenue Commissioners Notes for Guidance Taxes Consolidation Act 1997 Finance Act 2015 Edition Part 4 Principal Provisions Relating to the Schedule D charge, which is available at http://www.revenue.ie/en/practitioner/law/notes-for-guidance/tca/part04.pdf.

The taxation of all rental property in the State is dealt with under the same legislation, and an attempt to carve out a cohort of 'accidental' landlords would prove problematic.  There are many reasons why individuals might choose, or feel obliged, to rent a property while putting their own mortgaged property out to rent, such as relocation for work purposes or changed family circumstances, and all are treated equally by the tax system.  The provision of additional tax deductions to one sub-set of landlords could create difficulties in the rental marketplace as a result of the advantage obtained over other landlords of similar residential property.

I am conscious of the challenges that individuals continue to face, despite the improving economic conditions. However I would also note that the changes to the income tax system included in Budget 2015 mean that individuals who paid Income Tax and or USC in 2014 saw a reduction in their tax bill in 2015 where incomes were equal. Budget 2016 continued this process of reducing the tax burden on low and middle income earners including, among other changes, a decrease in the three lowest rates of USC with effect from January 2016.

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