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Foreign rental income

  1. Overview
  2. What expenses and deductions are allowed?
  3. What expenses and deductions are not allowed?
  4. How to calculate your taxable foreign rental income
  5. Foreign rental income and double taxation

What expenses and deductions are allowed?

You can claim expenses and deductions that are allowed under Irish tax law and that are fully related to earning rental income. These include:

  • managing the property
  • insurance
  • repairs
  • local authority rates
  • interest on loans used to purchase the property
  • fitting out and furnishing the property.

Capital allowances

You can claim capital allowances on the fitting out and furnishing of your foreign rental property. The fixtures and furniture must belong to you and be in use at the end of each year that you claim for. You can claim these allowances over eight years at 12.5% per year.

You may sell your fixtures and fittings during the year. If you do, you may be allowed an additional allowance. This is called a balancing allowance.

Your sale proceeds may exceed the depreciated value of these fixtures and fittings. If they do, there may be a clawback of allowances that you have already received. This is called a balancing charge.

See the example below:

  • Example

    Susan owns a house in Spain which she rents out to a tenant.

    In 2018, she bought a washing machine for the house which cost €250. She claimed capital allowances at a rate of 12.5% of the cost of the washing machine against her rental income from the house for the years 2018, 2019 and 2020.

    In 2021, she sold the washing machine for €100. As she sold the washing machine for less than its written down value, she is allowed a balancing allowance.

    The written down value of the washing machine is what it cost Susan, less the capital allowances she claimed.

    Susan's balancing allowance calculations for 2021
     Description Amount
    Washing machine cost   €250
    Less 2018 Capital allowance €250 @ 12.5% €31
    Less 2019 Capital allowance €250 @ 12.5% €31
    Less 2020 Capital allowance €250 @ 12.5% €31 
    Written down value at end 2020  €157 
    Less proceeds of washing machine sold in 2021 €100
    Balancing allowance for 2021 €57

Mortgage interest relief

You can claim mortgage interest relief against your rental income. The interest must be from a mortgage used directly to buy, improve or repair your rental property.

Mortgage Interest Relief is restricted to a percentage of the interest as follows:
  Percentage
Interest accrued on or after 7 April 2009 to 31 December 2016 75%
Interest accrued from 1 January 2017 to 31 December 2017 80%
Interest accrued from 1 January 2018 to 31 December 2018 85%
Interest accrued from 1 January 2019 100%

If you buy the property through a company, you cannot claim a deduction for interest payments. This is because the mortgage has been used to purchase an interest in the company and not to purchase the property directly.

Can you claim interest relief from the time that you take out the loan?

You can only claim for interest that is paid during the time the property is let. This means you cannot claim for interest paid:

  • between the time you purchased the property and the time you first let it
  • between lettings where you or others stayed in the property rent free.

Next: What expenses and deductions are not allowed?

Published: 26 October 2023 Print this page

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