What tax breaks for landlords are expected in budget 2023

FAQ – What tax breaks for landlords are expected in budget 2023

The goal of tax breaks in the upcoming budget (27/09/2023) is to incentivize smaller landlords to stay in the Irish property market.

Restore tax credits for tenants which was removed in 2017 is now being seriously discussed to come back in next years bill

Potential options and their effects

1. In an effort to keep landlords in the industry for the long term, policymakers are thinking about giving them tax credits. Landlords might be eligible for a credit if they agree to a five or ten year lease.
2. One possibility is to permit the local property tax to be deducted as an expense from rental income. As municipal property taxes are a relatively small expense, a review in 2019 urged against this because it would treat landlords and owner occupiers differently.
3. The option of letting landlords deduct rental losses from other taxable income in the current year is another proposal. This would strengthen your cash position if your allowable expenses are more than your rental income. However, there are worries that such a strategy could encourage tax planning and tempt landlords to leave as soon as their losses were offset by other income.
4. Another alternative being considered is to offer 4% annual capital gains tax relief after a property is purchased with a tenant in place and remains a rental property for five years. It might help keep tenancies intact and encourage investors to buy properties already occupied by a tenant. Additionally, it would eliminate one of the justifications for requesting vacant possession when selling a house, which is seen to be a contributor to homelessness.
5. Creating a new system of taxing rental revenue, with the option to mimic the system that applies to renting out land for farming, so that taxable rental income is lowered based on the period of the lease. With a potential annual cost of about €155 million, it would classify such earnings differently from salaries and wages.
6. The housing department is also considering more funding for first-time homebuyers, affordable purchase, and expanding affordable rental housing schemes.

Although these incentives are attractive if a landlord is to avail of any tax breaks they would be unable to leave the rental market for 6 years.

For further reading:

• https://www.gov.ie/en/collection/d5b41-budget-2023-tax-strategy-group-papers/
• https://www.irishtimes.com/ireland/2022/08/18/ministers-discussing-plan-for-landlords-and-tenants-as-part-of-budget-2023/
• https://www.independent.ie/irish-news/education/landlords-could-be-offered-budget-tax-breaks-if-they-give-long-leases-to-tenants-41967511.html

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