Michael Noonan (Limerick City, Fine Gael)
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There are a number of tax implications with regard to renting a mortgaged property. These apply for all landlords, regardless of whether the landlord is renting elsewhere.

Mortgage Interest Tax Relief

Section 244 of the Taxes Consolidated Act 1997 provides for tax relief in respect of interest paid on qualifying loans taken out to purchase, repair or improve a property that is used as a sole or main residence.

The relief, which is due to end in 2017, is available in respect of all qualifying home loans taken out between 1 January 2004 and 31 December 2012.

Persons that purchased their home within this specified date range are entitled to a 30% rate of relief on interest paid up to an interest ceiling of €20,000 if married/widowed and €10,000 if single, for the first seven years. Thereafter, the ceiling reduces for the remaining years to a maximum of €6,000 if married/widowed and €3,000 if single.

Revenue has informed me that the person would initially have been entitled to the relief at the 30% rate with effect from 1 January 2008 through to 31 December 2014. However the entitlement would have been discontinued from the time the person started to rent the property out because it no longer served as his/her sole or main residence.

If the person subsequently returned to live in the property as his/her sole or main residence, then he/she should reapply for mortgage interest relief.

Tax on rental income

I am informed by the Revenue Commissioners that the taxable amount of rental income from the letting of property is the gross rent less allowable expenses incurred in earning that rent, as specified in section 97(2) of the Taxes Consolidation Act (TCA) 1997. The main deductible expenses are:

- any rent payable by the landlord in the case of a sub-lease;

- the cost to the landlord of any goods provided or services rendered to a tenant;

- the cost of maintenance, repairs, insurance and management of the property; and

- interest on borrowed money used to purchase, improve or repair the property. This relief is restricted to 75% of the interest payable on borrowings related to residential property and is subject to full compliance with registration requirements of the Private Residential Tenancies Board.

In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted on the actual cost of the fixtures and fittings at the rate of 12.5% per annum over a period of 8 years.

The Office of the Revenue Commissioners has published a guide to the income tax treatment of rental income. It sets out the amount of rental income to be taken account of for income tax purposes and provides a comprehensive list of expenditure items that are allowable for deduction in computing the rental income for income tax purposes.  This guide is available at:  .