What are Capital Allowances and how do they relate to my Rental Income?
Capital Allowances are one of the most overlooked expenses by landlords. The most common example of a capital allowance is furniture purchased to initially furnish a rental property.
The total cost of this furniture cannot be written off in one go, instead the expense is claimed over a number of years, hence the idea of Capital Allowance.
Other costs such as purchase of white goods (fridge, freezer, dishwasher, etc), purchase and fitting of carpets/wooden floors and large expenditure items fall into the area of Capital Allowances
How much can be claimed?
The current capital allowance is 12.5% of the cost over 8 years. For example, if you purchase a suite of furniture for €1,000 a capital allowance of €125 per year can be off-set against the rental income for tax purposes for the next 8 years.
The documents/receipts relating to these costs must be retained for a period of 6 years, as per Revenue.