Tax Changes Set To Make 2017 More Positive For Irish Landlords

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As we enter a new year there is some positive new for Irish Landlords to finally cheer on after several years of adversity. In the recent November budget it was announced by the Minister for Finance, Michael Noonan TD, that he would start to reverse the effects of the late Brian Lenihan's tax changes which had a seriously negative impact on the sector.

Back in 2009 it was announced that landlords would no longer be able to offset 100% of their mortgage interest against their tax bill. This gave rise to the perverse situation where landlords could actually end up paying tax on profits that they were not making. Of course if the government of the day had not grossly mismanaged the economy, then the need for such emergency measures could have been abated.

As one of the chief culprits in the fiasco said "We are where we are". Ho hum! Now, as the following simplified example shows, if your rent as a landlord was €1000.00 per calendar month (PCM) and your mortgage interest bill was also €1000.00 per month, then your rental income and mortgage interest would each be €12000.00 per annum.

Lenihan's tax changes meant that as far as the tax man was concerned after 2009, your mortgage interest bill was only €9000.00 per annum (75% of €12000.00) resulting in a theoretical profit of €3000.00 being made per annum by you as a landlord. Hence you were liable to pay tax on this "profit"

Of course the above simplified example does not take into account service charges, broken washing machines, carpet replacement etc etc, but rather illustrates the negative impact of the tax changes in an easy to understand fashion. Thankfully those negative tax changes now are being reversed with the rate now moving up to 80% and by 5% each year thereafter until this grossly unfair tax change is finally abolished.

Finally it appears, there may at last be something positive to cheer about for a sector that has faced several challenging years. I wish you and your nearest and dearest a happy and prosperous 2017.

D. Kerr.