PROPERTY investors will be able to deduct the property tax from their rental income when filing a tax return.
The move could ease the burden on buy-to-let investors, many of whom are struggling to meet mortgage repayments.
The non-principal private residents (NPPR) and the household charge are not allowed as expenses when landlords are working out their profit as part of a tax return.
But Finance Minister Michael Noonan has confirmed the property tax may be treated differently. He said he intends to amend the new legislation to allow the tax to be treated as an expense for landlords.
"The Thornhill Group recommended that the local property tax paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates.
"This is not provided for in the Finance (Local Property Tax) Act 2012 but it is the intention of the Government to introduce such a provision on a phased basis."
Mortgage adviser Karl Deeter said it made sense to allow landlords to expense the property tax as part of tax returns. This was in keeping with best practice internationally, he said, adding: "It is a legitimate expense."
Not to allow the tax as an expense would mean someone with mortgage interest of €10,000 and rental income of just €5,000 would end up paying property tax, despite having a negative rental income, he said.
About 150,000 mortgages were taken out to finance buy-to-lets, the Central Bank said. Some 51,000 of these mortgage accounts are in trouble, made up of 37,000 in some form of arrears and 14,300 which have had the monthly repayments reduced but are not in arrears.
These restructurings have had to be put in place despite the fact that most investor mortgages are interest only.
The pressure is coming on those seeking restructuring deals, with Bank of Ireland and subsidiary ICS Building Society asking those on cheap trackers to pay an additional 1pc in interest if they want a mortgage repayment modification.
Monday, January 21, 2013
Buy-to-let investors will be allowed to file property tax as expense - Independent.ie