Can management service charges be claimed as an expense against rental income?

• Published date: 11 April 2024
• Publication title: Irish Times (Dublin, Ireland)

Is the annual management service charge an allowable expense to offset rental income? I did open the allowable expenses link that you referenced in the article, but upon opening it, it didn’t specifically address this fee, although it seemed to suggest that as long as it wasn’t reimbursable from the tenant, it should qualify

A You can claim certain expenses against your rental income to reduce the amount of tax you pay. Generally speaking, you may be able to take a full deduction for the annual costs of the service charges charged by the owners’ management company (OMC). On its website, Revenue set out what expenses are allowed. It is important to consult a tax expert on the matter of what is allowed and what is not. The annual service charge is normally made up of several items on the service-charge budget which are the running costs of the development for the year. Sometimes in budgets, there is a sinking-fund item and, in this regard, it will be important to understand what the service charges are made up of to assess what may be allowed.

According to Revenue allowable expenses include:

nRates you pay to a local authority for the property;

nRents you pay for property such as ground rents;

nInsurance premiums against fire and public liability;

nMaintenance of your property such as cleaning, painting and decorating;

nProperty fees before you first rent out your property such as management, advertising, legal or accountancy fees;

nCost of any service or goods you provide that are not repaid by your tenant (such as electricity, central heating, telephone, service charges, water and refuse collection);

nCertain mortgage protection policy premiums;

nExpenses between lettings provided the landlord did not occupy the property before a new lease was signed;

nCapital allowances;

nRepairs such as rot treatment, mending windows, doors or machines;

nCertain pre-letting expenses on vacant residential property;

nThe cost of registering with the RTB.

You must keep full and accurate records of all expenses for each property you rent out.

Although the sinking fund may be somewhat capital in nature, it is usually used and saved for future larger capital expenditure projects such as roof replacement or lift replacement and Revenue has set out what expenses are allowed. In many cases, it is the amount on the service charge invoice which is received from the OMC that is claimed against the rental income in a rental income computation.

In addition to this, you can claim...