Monday 26 September 2016

Can I write off the cost of a new washing machine in my rental property against tax?

Cathal Maxwell

Published 01/11/2015 | 02:30

Assuming this was the first time you bought a washing machine for the property letting then I would advise treating it as part of the fit-out and you then claim the cost over eight tax years
Assuming this was the first time you bought a washing machine for the property letting then I would advise treating it as part of the fit-out and you then claim the cost over eight tax years

I started to rent out a property about two years ago and am now filing the tax return for the rental income received in 2014. The washing machine in the rented property broke down that year - and as the washing machine was quite old, I decided to replace it with a new one. A friend mentioned to me that I cannot claim the full cost of the washing machine off my tax bill for 2014 as it wasn't a repair as such. Is this true? The company that supplied the washing machine also installed and delivered the machine and I was charged installation and delivery fees. Are these fees tax-deductible? Also, what happens if I do not make a tax return? Kevin, Walkinstown, Dublin 12

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First of all, you treat the installation and delivery fees as being part of the cost price. The next issue is not so clear-cut. What is a repair/replacement and what is not is a matter that continually comes up.

Assuming this was the first time you bought a washing machine for the property letting then I would advise treating it as part of the fit-out and you then claim the cost over eight tax years.

However, with the ever-decreasing life of utilities which are not too expensive to replace, most Revenue officials would allow an immediate write-off if the cost is under, say, €250 to €500 in the case of ongoing lettings.

But if you bought a lot of items at the same time (which is more likely to happen for the first-time letting) and even if they each were within these limits, you would have to treat them as part of the initial fit-out and claim the cost over eight tax years.

A lot of people overlook what I call the 'internal fit-out', such as central heating, built-in furniture and sanitary fittings - the cost of which can also qualify for a tax claim over eight years provided you have evidence of what you paid for them.

If you do not make a tax return, the chances are you will hear from the Revenue sooner or later. The Revenue now have the best property register in the State arising from the local property tax system. So they now know who owns what. They are matching properties to tax numbers so that they can tell if you are not using the property as your residence.

They are also getting information from the Private Residential Tenancies Board (PRTB) regarding landlords. Online tax returns for 2014 can still be made up to November 12, so it's not too late to make the deadline and keep your tax affairs in order. Penalties and interest charges will be applied for tax owed due to the late submission of tax returns.

I'm looking for help with regard to my self-assessment for last year. I'm filing my return for my husband and I and I'm unsure whether I can claim my PAYE credit for last year.

Basically, I was in receipt of maternity benefit for most of the year as I had two pregnancies close together. I went back to work for two weeks as a PAYE worker and eight weeks as self employed as my work involves both types of contracts.

As my work is both PAYE and self-employment my maternity benefit was based on both contributions combined.

My maternity benefit is taxable but I'm not sure if this would be considered PAYE earnings in order to claim PAYE credit that may benefit our joint return.

Catriona, Ashtown, Co Meath

The good news is you can claim the PAYE tax credit in respect of maternity benefit. It is treated as if it was PAYE income for the purposes of the PAYE tax credit. The credit is allowed at a rate of 20pc of the benefit subject to a maximum credit of €1,650 for 2014.

I am thinking of letting out my apartment, as I want to move to a house to start a family and I was wondering if I can claim the cost of renting a new property for tax relief against the rental income from my apartment?

Also, I am a PAYE worker so how do I make a tax return of the rental income?

John, Galway

Unfortunately you cannot claim any tax relief for the renting of a new home even though you will be letting out your apartment. The profit rent from the apartment will be liable for income tax, PRSI and USC at your top tax rates.

The options for completing your tax return are to do it yourself, engage an accountant or use one an online tax return service.

Remember you must register the letting of the apartment with the PRTB. If you forget, you will not be allowed claim any tax deduction for mortgage interest in respect of a mortgage on the apartment which would leave you with a large artificial rental profit and a large tax bill!

Also you must cancel your home mortgage tax relief at source (TRS) tax relief if you are claiming it for your apartment.

I own an apartment that is in major negative equity. However, I am lucky in that my parents would like to help get a new home and are willing to give me an early inheritance of €375,000 to buy a new home.

Is there any smart way to organise this from a tax point of view?

Mary, Little Island, Cork

If your parents give you cash of €375,000, you will owe gift tax of circa €29,000 assuming you have not received any gifts from them in the past. It also fully uses up your normal tax-free parent to child threshold of €280,000 (increased in Budget 2016) so if you get any more gifts or inheritances from your parents, they will be liable for full tax.

My advice would be to sell your existing home and hopefully negotiate a reduction in the amount owed from your lender for doing so.

Your parents would then buy a new home for you but keep it in their names for at least three years. Then they would transfer the house to you and assuming all qualifying conditions are met there would be no gift tax payable.

Also it means that your tax-free parent-to-child threshold is not used up so you could get later gifts or inheritances free of tax up to the amount of the tax-free threshold. There would be some tax implications for your parents but these should be far exceeded by the tax savings on the gift/inheritance.

Email your questions to lmcbride@independent.ie or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

Cathal Maxwell is a chartered accountant and tax consultant and also runs online tax return service paylesstax.ie

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