Did you acquire a residential investment property that was vacant for a period of at least 12 months before it was first let? You may be able to claim a tax deduction for pre-letting expenses against rental income in the first year.
Generally pre-letting expenses are specifically disallowed by Revenue in calculating taxable rental profits of an individual or company. However, Revenue have updated its position to now allow such pre-letting expenditure under certain circumstances.
What properties will the deduction apply to?
Revenue will now allow pre-letting expenses to be claimed as a rental deduction on properties that have been vacant for at least 12 months and which has been let as a residential property between 25 December 2017 and 31 December 2021.
When must the expenditure have been incurred?
The expenditure must have been incurred in the 12 months before the property is first let after the vacant period.
What type of expenditure can be claimed as a pre-letting expense?
Revenue provides a list of expenditures which are considered qualifying rental deductions. If the pre-letting expenses incurred are included in the list of qualifying rental deductions then the expense may be claimed as a deduction in the first year that the rental property is first let after the vacant period.
Is there a cap on the amount of expenses that can be claimed?
Yes. Pre-letting expenses cannot exceed €5,000 per vacant property.
What are the consequences if the property ceases to be let?
If a person claims a deduction for pre-letting expenditure and either sells the property or changes the use of the property within 4 years of first letting the property, there should be a claw back of the deduction in the year that the property ceases to be a rental property.
The above information should be treated as a guide only.
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