Your queries answered

Claiming expenses on rented apartment

Q

Can you tell me what we can claim for when it comes to an investment apartment? I bought it in 2000. The rent is €12,000 per year and management fees are €3,000. I have no mortgage and therefore paid €4,000 in tax last year. Are there ways I can offset some of this tax bill?

- Ms MM, Dublin

A

As you suspect, there are a number of expenses that may be claimed against rental income before assessing your tax liability. Chief among these is qualifying mortgage interest, although this clearly does not apply in your case. Premiums on any mortgage protection policy related to the apartment would also be included.

Your management fees are, however, an allowable expense. Advertising costs, estate agents’ fees, legal fees incurred in drawing up leases and accountancy fees for preparing rental accounts can also be used to lower your tax payment, as can the cost of registering with the Private Residential Tenancies Board (PRTB) which you are obliged to do as the owner of an investment property.

Insurance premiums paid on the property and refuse and other charges that arise are other costs that need to be taken into account, provided the landlord pays them.

Another possibly significant cost is that incurred for repairs and maintenance of the apartment – although you cannot claim for your own labour or for expenses which arose before the property was let.

Finally, you can claim capital allowances against income tax for wear and tear on items bought to furnish the property. This is calculated at 12.5 per cent of the cost per annum over eight years.

On the other hand, on top of tax on rental income, you are obliged to pay the €200 annual second home tax.

Getting around gift tax on Lotto winnings

Q

Some time back you answered a query from someone about whether there would be tax implications in the event of them winning the lottery and passing some of those winnings on to their children. You referred to gift tax.

But what if you said your family was a syndicate? Who's to know? That way you could give them as much as you want tax-free. Right?

- Mr BC, e-mail

A

That depends on the age of the children. As you note, there is nothing to say whether a winning lottery ticket belongs to one person or to a syndicate – in this case a family syndicate – as most such syndicates are purely informal arrangements.

However, there are a few rules around the purchase of lottery tickets and the most relevant one to this case is the preclusion on children who are minors in the eyes of the law from purchasing lottery tickets.

Thus, if the children to whom you refer are under 18, they would not be allowed to benefit from Lotto winnings as part of a syndicate.

They are not entitled to be syndicate members. In that event, any transfer of funds to them would come under the provisions of capital acquisitions tax, or gift tax.

Of course, in the case of adult children, there is no such impediment.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com