How to calculate tax on rental income

Rents derived from an Irish property are liable to Irish taxes regardless of where the owner is resident.

For resident and domiciled individuals, rents from worldwide properties are generally subject to Irish taxes. Individuals’ resident but not domiciled in Ireland are only taxed on foreign rental income if remitted to Ireland.

Not all rental income is treated the same.

Owners of properties let on a continuous short-term basis (such as AirBnb) may be treated as carrying on a trade. Not only does this impact the calculation of profit, such lettings may be liable to Irish VAT.

The following deductions are allowed when calculating taxable rental income:-

• Agent's fees and advertising costs,
• Management fees and maintenance costs,
• An allowance of 12.5% of the cost of fixtures and fittings,
• Mortgage interest on loans taken out to purchase, improve or repair the property let,
• Insurance premiums and certain mortgage protection premiums, and
• the PRTB levy.

For residential lettings, entitlement to relief for mortgage interest is conditional on compliance with the Residential Tenancies Act 2004.

Rental income from the letting of a room in a qualifying residence is exempt where certain conditions are met. The conditions are:-

• The gross rental income is less than €14,000,
• The room is let to an un-connected person (i.e. the tenant cannot be your child, civil-partner, or an employer) or to a short-term guest,
• Generally, the letting period must be for lettings of 28 days or more (although there are exceptions),
• A qualifying residence means a person's home or a self-contained unit within the house.

Considerable difficulties arise where property is let through online accommodation booking sites or on a short-term basis.

Activities of this nature carry risks and also provide opportunities for planning including:-

• the possibility of being accountable for VAT on lettings at 13.5%,
• having to contend with different rules for calculating profits,
• the possibility of accessing favourable tax treatment of assets passed on by gift or inheritance, and
• the possibility of tax-free treatment of certain income during the first 24 months of trading