Claiming expenses after tenant has left my property

I rented out a house for the first six months of this year. I subsequently spent money on renovations and cleaning, etc, after the tenants moved out.

Am I allowed claim expenses even though the tenancy and expenses didn’t dovetail?

Mr M.B., Galway

We hear a lot right now about the rental market and it is clear there is huge demand for accommodation and limited supply. Rents are rising and it can seem a very attractive proposition for property owners. But renting is a tricky business, with plenty of rules and procedures to trip up the unwary.

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Anyone who has let out a property knows that there is inevitably some work needed when a tenant leaves. With the best will – and tenant – in the world, there will be things that have to be done before attracting a new tenant.

While the big institutional lenders have whole departments to sort out the paperwork and teams of advisers to ensure they maximise their potential yield from property, small landlords need to make sure they put in the work to stay within the rules without losing out on permitted reliefs and expenses.

One of the overarching rules about claiming expenses on renting is that you cannot claim for expenses incurred before you decide to rent or after you finish renting. And this is the nub of the issue for you.

It’s not clear whether this was your first rental of this property and it is also unclear whether you intend to rent it out again after the renovations, or not. The answer to this latter question will very much determine what you can claim.

There is a blanket ban on claiming any expenses following the final letting of a property. The unassailable logic is that if the property is no longer available for rent then there is little sense in granting relief for expenses incurred in its upkeep or maintenance.

However, if you are between lettings, that's a separate situation altogether. The Revenue's Guide to Rental Income states: "Expenses incurred in the period between lettings are deductible provided the landlord was not in occupation of the premises during the period and a new lease is granted."

So if you moved in after the tenant left, then you will not be able to claim but if you were not living there but had work carried out, you will be okay to claim against rental income – as long as you got people in to do the job. A separate exclusion on expenses applies to the cost of your labour.

It doesn’t matter if you are fully qualified to do the work or not, a landlord cannot claim for their own time even if that might be cheaper all round and more efficient at times when such specialist tradespeople can be hard to find.

Pre-letting

The same rules, and the same logic applies, to expenses incurred before you first let the property. Thus, you won’t be able to charge for upgrading or modifications made to the building between the time you bought it and its first rental.

However, do remember that if you have had some expenses in this area, they might be allowable against capital gains when you sell on the property as enhancement expenditure, depending on the nature of the work.

Mortgage interest is also not claimable ahead of a tenancy. You can claim this while the property is let but not before the first rental.

There are some limited exceptions to this rule. These relate specifically to costs incurred in the process of renting but before the first tenant signs up. They include any fees incurred advertising the property or letting fees paid to an estate agent.

Legal expenses paid ahead of a first letting are also allowable, such as those involved in drawing up tenant contracts, etc.

According to the Irish Property Owners’ Association, which represents mostly private landlords, there is an exception that allows landlords to claim up to €5,000 in expenses on upgrading a property that has lain empty for at least a year before the first rental – as long as it is rented before the end of this year.

The relief applies only to relevant properties let out between Christmas Day, 2017 and the end of 2021 and the expenditure must be incurred in the year ahead of letting.

Allowable expenses

So assuming you are either between lettings or have the property rented out, what can you claim for in the normal course of events.

Clearly, as with pre-letting exemptions, any legal or estate agent fees connected to the renting of the property are allowable, as are related accounting fees.

You can also claim the cost of registering the property with the Residential Tenancies Board, as you are obliged to do, and insurance premiums you pay on the building and for public liability.

You also get to claim capital allowances. This is essentially the depreciation – or wear and tear – of furniture or fittings you buy for the rented property. These can be written off over eight years at 12.5 per cent per year.

As with all expenses you intend to claim, do make sure you retain receipts for such expenditure. Revenue advises that these receipts need to be kept for six years after the year in question – unless Revenue formally informs you otherwise.

Maintenance or repairs, such as the work you were mentioning at the outset, is allowable against rental income – as long as the property is let or being let again. This includes such mundane items as cleaning or putting on a lick of paint as well as more serious repairs for new doors or windows, sorting out damp or repairing a roof.

Most tenant contracts these days will see them responsible for utility charges on items such as service charges, bin collection, electricity, heating and phone bills, but if not, then the landlord can claim.

Finally, of course, for the duration of the period it is rented, you can claim mortgage interest on any loan used to buy the property as well as the cost of mortgage protection on the loan.

Keep across the paperwork or you will end up losing out. Revenue will not be interested in “estimated” expenses unless you can back them up with receipts. And remember, if you are considering doing the work on the property yourself to save money or time, so be it, but you will not be able to reclaim anything on that labour.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into