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Can I claim rent tax credit on house whose owner is under Fair Deal nursing home care?

Q&A: Property is not currently registered with Residential Tenancies Board and there are questions over tax compliance

An informal rental arrangement with someone who has gone into a nursing home could present problems for both of you. Photograph: iStock
An informal rental arrangement with someone who has gone into a nursing home could present problems for both of you. Photograph: iStock
Dominic Coyle's picture
Dominic Coyle
Tue Nov 07 2023 - 05:15

I’m currently renting a property, the owner of which is in a nursing home under the Fair Deal scheme (as far as I’m aware) and in receipt of the state pension.

My question is whether I am eligible to claim the renters tax credit and if, in doing so, there will be an impact on the homeowner’s pension payments. Due to the nature of the arrangement, the lease is not registered with the RTB, but I understand this was not a requirement previously.

Mr K.D.

Renter’s tax credit has been a fillip for tenants paying rents that have been running at record highs over recent years. And the increase announced in Budget 2024 means that it will be even more useful next year.

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However, there are a number of conditions to securing the tax credit and I am not sure your situation is one that will qualify. There are a couple of issues that arise with your query and we might go through these one by one.

The most straightforward one, I guess, is your point about the homeowner’s state pension. Whether this is affected by any income they receive from you in rent is down to whether it is a contributory state pension or a non-contributory one.

A contributory state pension is one you earn as of right on the basis of social security stamps – PRSI payments – made throughout your working life. Entitlement to this pension is, for now at least, not impacted by any other income you may have, either from ongoing employment, rental income, investment income or anything else.

I say “for now at least” because there is some doubt whether the State will have the financial wherewithal to continue to pay pensions to everyone regardless of means in future years. But that is not something that is going to worry your landlord.

The situation is very different if they are receiving a non-contributory state pension because it is based on financial need and is means-tested. Naturally, if they are now receiving rental income which was not a factor when they were first assessed for pension, it would require them to go through the means test again and their pension would be reduced or wiped out entirely.

More to the point, if they are on Fair Deal, they are obliged to contribute a certain amount of their income towards the cost of their care.

In general, this amounts to 80 per cent of their income but the contribution from rent is lower – 40 per cent – as the Government is looking to incentivise nursing home residents, or their families, to rent out their homes at a time of a national housing crisis.

There is talk of allowing Fair Deal long-stay nursing home residents to retain all their net rental income but that has not been actioned yet and is currently the subject of a review over concerns that it could lead to elder abuse by their families.

That reference to net rental income should also alert you to the fact that never mind the impact on their pension, your landlord will likely be liable for income tax on the rental income you pay them.

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So there are several issues on the impact of your rental income on their financial position.

Then there is the issue of the Residential Tenancies Board (RTB).

I’ve taken a look at their website which, among other things, outlines rented properties that are exempt from registration.

They include:

- Tenancies in local authority housing or under shared ownership lease arrangements;

- Holiday letting agreements;

- Properties let under the Rent-a-Room scheme (where the landlord and the tenant share the same self-contained property);

- Instances where a tenant lives with the spouse, civil partner, parent or child of the landlord and there is no written letting agreement in place, and;

- Properties that are short-term lets.

None of those categories covers your current arrangement and I cannot find reference anywhere to an exemption from RTB registration for the properties of people who are in long-term nursing home care, under Fair Deal or otherwise.

And of course, apart from registering, the property will need to meet certain minimum standards for rental set down by the RTB, which can be an issue for many homes of older people which have not been upgraded in some time.

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The practical issue for you is that you will not be able to claim the renter’s tax credit if your landlord is not compliant with the requirement to register the property and your tenancy with the Residential Tenancies Board.

The bottom line is that the informal nature of your rental arrangement means you will not qualify for the credit.

Oh, and one final thing. You don’t clarify the “nature of the arrangement” but if it means you are paying a rent that is below the market rate for the area, you will also be deemed by Revenue to have received a gift of the difference.

Depending on the size of that gift and the relationship, if any, between you and the homeowner, that could have implications for the tax-free exemptions under the Capital Acquisitions Tax regime, otherwise known as inheritance/gift tax.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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