Renovation work on rental property

Daithi Thorn

Hi,

I have an apartment that I rent and pay tax on through form 12.

During 2018i we'll look to carry out renovation work on the apartment that will cost probably 5 times the payable tax.

Im wondering what would be the best way to perform the investment. The two options i see are
(i) get out a top up mortgage
(ii) paying directly for the renovation and writing it off against tax.

I have a few questions about both options.

If I get a top up mortgage, can I use the interest I pay on that as well as the original mortgage in my tax calculation at the end of the year, or am I limited to the original mortgage interest only?

If I pay for the work upfront, I can write the bill off against the taxable income from the apartment. But the value of work will exceed the taxable income? So can I write this off over several years instead of just one?

Thanks for the advice.

Daithi

Calahonda52

Expenditure, which is of a Capital nature such as what you propose cannot be netted off against Income.

The second link below explains how Fixtures and Fittings are catered for but the reno will not be just F&F so much of the reno cost will be considered enhancement expenditure, which will come in to play when you sell.

Was there not something in the budget this year that made such work more attractive, and was in addition to the HRI for land lords?

https://www.revenue.ie/en/property/home-renovation-incentive/hri-for-homeowners-and-landlords/index.aspx

The interest on new debt should be allowable, subject to the 80% limit
https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

Daithi Thorn

Hi Calahonda52,

thanks for your reply. Regarding the work that i will be doing, it is actually repair work and not renovation that would enhance the value of the apartment. As they are repairs they wouldn't fall under the HRI.

From looking at the 2nd link you gave they do highlight that repairs are an allowable expense, and that if your rental expenses are greater than your income you make a loss, which can be carried forward until you make a profit.

Rgds
Daithi

Calahonda52

Re HRI, I see it differently
What type of work qualifies under HRI?
To qualify for the tax relief, you must have paid Value-Added Tax (VAT) at 13.5% on the work done to your property.

Examples of qualifying works include:

painting, decorating and tiling
plastering, plumbing and rewiring
bathroom upgrades
fitted kitchens
window replacement
extensions and attic conversions
garages, driveways and landscaping
septic tank repair or replacement.

Work that does not qualify
Some goods and services cannot be included in your claim for tax relief. These are goods or services that are provided by your contractor with a VAT rate of 23%. Examples of goods and services that do not qualify include:

carpets
furniture
appliances
services such as architects' fees.
If you buy materials yourself, for example, paint or tiles, you cannot include them in your claim for tax relief.