There is no tax based scheme along the lines suggested by the Deputy.
Regardless of whether a property is in negative equity, the rental income of the property for tax purposes is the gross rent less the allowable expenses incurred in earning that rent, as specified in section 97(2) of the Taxes Consolidation Act (TCA) 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 on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, 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.
From 7 April 2009 to 31 December 2016 landlords could claim a deduction of 75% of the interest payable on funds borrowed to purchase or improve a residential property against their rental profits. The percentage of interest allowed as a deduction for residential landlords was due to increase in 5% increments from 2017, until full deductibility was reached in 2021.
However, in Finance Act 2018, I provided for the restoration of full interest deductibility for all residential landlords. This measure took effect from 1 January 2019 and would be of benefit to many property owners in the position outlined by the Deputy.
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.
The effect of the deduction of allowable expenses from gross rent means the amount of taxable rental income will often be substantially lower than the gross rent, and could, depending on individual circumstances, be nil, in which case no tax would be due on the rent.