Over the last 8 years, news had generally been bad for landlords when it came to tax changes and new costs associated with owning rental property.
In 2009, mortgage interest became no longer fully tax deductible. Instead restrictions were introduced to allow only 75%. Other charges such as PRTB registration costs and NPPR tax were examples of new costs hitting landlords.
There was some relief presented in Budget 2017 last October, when Michael Noonan announced the 75% restriction on mortgage interest relief would be adjusted to allow 80% from 2017 and that it would be fully restored by 2021. Baby steps, but signalling a change in the previous trend of increasing costs for landlords.
The latest news in favour of landlords comes in the form of a recent High Court decision on a case taken against Revenue on the NPPR tax.
NPPR – A tax on second homes
If you’ve been a landlord since at least 2013, you will probably remember the NPPR. This was a tax on second homes. It stands for Non-Principal Private Residence.
The NPPR was charged at €200 per property per year. Controversially, Revenue had always stated that this charge was not a tax deductible cost for landlords. It was not allowed to be claimed against rental profits.
However the High Court have now taken the view that Revenue were wrong to do this and have ruled that the NPPR should have been treated as a tax deductible cost.
The NPPR existed between 2009 and 2013. Therefore landlords incurred a cost of €200 per property for each year between 2009 and 2013. Unfortunately this High Court ruling doesn’t mean that landlords can go back and now claim the extra tax relief for each of those years. Due to Revenue’s 4 year restriction on claiming tax refunds, currently you will only be able to claim the additional tax relief for 2013. A somewhat unfair application of the rules in the circumstances, but there’s at least a small tax refund available for any landlords who want to amend their 2013 income tax return to now claim the NPPR.
Fenero are experts in rental income tax returns. If you are a landlord and need tax advice or help with your income tax returns, get in touch!