Are the costs of maintaining my rental property tax deductible?

Property Clinic: As with all taxation issues, it is important to consult an accountant

My question relates to a rental property which has been vacated by the tenants in order to temporarily accommodate a family member of the landlord. After the family member has left the property, are maintenance and repairs, carried out prior to re-letting, tax deductible?

While you have focused in on the refurbishment and related tax issues, there are some other compliance issues you should consider first.

In your query you advise that the tenants vacated the property “in order to temporarily accommodate a family member”. There are a couple of important points you should have considered when taking this action. Firstly, as a landlord you have rights and obligations to the tenant as conferred by landlord and tenant law and as per any tenancy agreement which you had in place. Some of the key pieces of legislation governing this relationship are as follows:

  • The Landlord and Tenant Acts 1967-1994
  • The Residential Tenancies Act 2004 (as amended 2015/2016/2019/2020)
  • The Planning and Development, and Residential Tenancies Act 2020
  • The Housing (Standards for Rented Houses) Regulations 2019

As a landlord, you must register the tenancy with the Residential Tenancies Board (RTB) and update it of any changes to the tenancy. From last year you are also required to register the tenancy on an annual basis.

In addition, there are some other obligations relevant to your query:

  • Provide a Building Energy Rating (Ber) for the property when letting as well as maintaining the building structure and repairing the interior of the property.
  • Provide your tenant with a rent book or statement of rent paid.
  • Reimburse tenants for any repairs they make which are your responsibility.
  • Insure the property (although tenants are required to insure their own possessions).
  • Ensure that the tenant knows how to contact you or your letting agent.
  • Comply with rent review notice periods and follow the latest rules when conducting this process.
  • Provide tenants with a valid written notice of termination and follow the latest rules around terminating a tenancy.

This last point is particularly relevant. The type of lease the tenants were on dictates the actions you can take. For example, if they were on a fixed-term tenancy you could not legally end the tenancy unless the tenants were in breach of their obligations under the lease. If the tenancy was not a fixed-term tenancy, then you as the landlord were entitled to ask the tenants to vacate within the first six months without giving a reason.

If the tenant was in situ for more than six months, they will have gained security of tenure rights as per Part 4 of the Residential Tenancies Act. In this situation you can ask the tenant to vacate only in specific circumstances, one of these being if the landlord or a family member intend to live in the property, which you indicate was your situation. A member of the landlord’s family is defined as a spouse, civil partner, child, stepchild, foster child, grandchild, parent, grandparent, stepparent, parent-in-law, brother, sister, nephew, niece or person adopted by the landlord under the Adoption Acts. In addition, you should have provided a sworn statutory declaration providing specific details which include:

  • The intended occupant's identity
  • Their relationship to the landlord
  • The expected duration of their occupation

The original copy (not a photocopy) of the Statutory Declaration must be served at the same time as the Notice of Termination; failure to do this would have invalidated the termination notice.

You advise that the family member has now left, and you are preparing to re-let the property. However, you should be aware that landlords must offer the property back to the tenant who vacated, on foot of a valid notice of termination, if the property becomes available to rent again. From June 4th, 2019, the time that a landlord must offer the property back to the tenant was extended from six to 12 months from the expiry of the notice period.

In terms of tax deductions, revenue.ie advises that you cannot deduct the following expenses when you are calculating your rental profit or loss:

  • Pre-letting expenses, other than property fees before you first rented out the property
  • Post-letting expenses
  • Capital expenses on property improvements unless allowed under an incentive scheme
  • Any cost for your own labour when carrying out repairs to the property

While section 97A Taxes Consolidation Act 1997 (TCA), inserted by Finance Act 2017, does refer to certain residential pre-letting expenses being tax deductible, it is based on the property being vacant for 12 months. You can get more details at iti.ms/33ahNyK

As with all aspects of taxation, it is important to consult your accountant, who will be fully briefed on your personal situation, and they will be able to provide you with the best advice possible. – Enda McGuane

Enda McGuane is a chartered planning and development surveyor and a member of the Society of Chartered Surveyors Ireland, scsi.ie

READ MORE