Inheritance House Renovated and now Rented

morrga

Anyone who understands tax liabilities on rental income versus refurbishment costs would of great help here.
Couple A and Couple B are left a house in a will. Infused on what to do with house, Couple A decide to refurbish at a cost of €30,000 and when finished begin renting house stating they will collect rent until the 30k is recouped. Proof of refurbishment costs not proven but Couple A say they have the receipts of cost.
Is it allowed to offset any tax bill with this 30k cost and could Couple B be left liable to a tax bill?

April 73

As far as I am aware the costs of renovation/decorating prior to letting are not allowed as a tax write-off against rental income.

If the house is jointly owned then the rental will be apportioned to both couples by Revenue & will be liable to PRSI, USC & income tax at their marginal rates (less allowable expenses).

Couple A cannot just claim the full rental income until the €30,000 is repaid & ignore the tax implications that will arise for both couples on the rental income.

athtrasna

Pre-letting expenses are not tax deductible. Both parties need to take legal and financial advice

Cath54

Think arrangement can be made with Revenue about this. Our situation was slightly different in that rental income was divided 70/30 between two parties and Revenue were fine with us paying tax/usc etc on our portion of the rental income only. Other party paid liability on their portion only also. Once both parties are in agreement and co-operate with Revenue I don't think there would be a problem.

Pawwed Rig

Sounds like a bit of a mess tbh.
Were they capital improvements? If so then a CGT deduction might be available. I would need to look at the exact circumstances to give you proper advice.

Was HRI considered for example?

morrga

Pawwed Rig wrote: »

Sounds like a bit of a mess tbh.
Were they capital improvements? If so then a CGT deduction might be available. I would need to look at the exact circumstances to give you proper advice.

Was HRI considered for example?

The house needed work to make it viable for living. HRI was not considered as a friend of couple A is a builder and supplied materials and and the so called invoices to make up the 30k. It's a small 2 bed bungalow in the countryside. What adds to the issue is the small matter of 30,000 renovation costs, not to mention the pending tax liabilities.

April 73

How did couple A go ahead with the renovations if couple B were not in agreement that it should be done? Is the house jointly owned?

Baby01032012

2 points from tax perspective

If there are any fixtures and fittings for which you have receipts then you can claim capital allowances on these and write them off against your taxable rental income at 12.5% pa

If the renovation costs have added to the value of the property and you have receipts these can be added to the cost of the property for future sale nd therefore reduce the potential CGT liability.

To add you should really get professional advice from an accountant as forum members can not offer this.

PS was there any CAT liability upon transfer of the assets to ye as a result of the inheritance?

morrga

April 73 wrote: »

How did couple A go ahead with the renovations if couple B were not in agreement that it should be done? Is the house jointly owned?

Couple B not clued into situation and just let couple A work away. Once probate complete house will be jointly owned.

morrga

Baby01032012 wrote: »

2 points from tax perspective

PS was there any CAT liability upon transfer of the assets to ye as a result of the inheritance?

Don't believe there will be any CAT under this inheritance.

Pawwed Rig

Baby01032012 wrote: »

2 points from tax perspective

If there are any fixtures and fittings for which you have receipts then you can claim capital allowances on these and write them off against your taxable rental income at 12.5% pa

If the renovation costs have added to the value of the property and you have receipts these can be added to the cost of the property for future sale nd therefore reduce the potential CGT liability.

Unlikely that they can as it seems to be a nod and wink building contractor.

This is a horrible mess now as Couple A have essentially given a €15K gift to Couple B so we are into CAT territory.

OP go to a professional before anyone spends anymore money

4ensic15

Couple B could be liable for gift tax for couple A as a result of the 30k. Couple B have been stroked and should get out of the situation by forcing the sale of the house.