Deductible expenses in the case of below-market rent

Deductibility of rental expenses depends on whether you charge rent for a dwelling unit at market value, i.e. in line with normal rent rates, or at below market value.

You can only deduct the full expenses of renting for dwellings rented out with an intent to gain income. This means charging rent at market value. 

What is meant by "renting out property at market value"?

Market rent refers to charging reasonable rent in line with the rent levels charged for similar properties in the same local district. If you have no other evidence of the district’s usual rent situation, market value can be determined on the basis of the taxable value of employer-paid housing (the fringe benefit value). For more information, see calculating the tax value of employer-paid housing.

Which expenses are non-deductible?

If you receive below-market rent from your tenant and if you took a loan when you bought your rental apartment, no deductions can be claimed for the interest expenses and miscellaneous bank charges associated with the loan. It is deemed that you did not borrow in order to gain or produce income, because you are not using the apartment with an intent to gain profits. 

Please check whether the loan’s purpose of use is pre-filled right, and if nothing is pre-filled, fill in the purpose of use as appropriate. The place where you can find this on the Tax card request form and on the Pre-completed return is the “Interest on loans” field. Fill in the paid interest under Other debt in case you are receiving below-market rent for your rental property. 

When your tenant only pays you below-market rent, you will also only have a limited right to claim deductions for losses relating to your rental operation. 

What deductions can you claim from the rental income you receive?

When you receive below-market rent, your tax deductions cannot exceed the amount of rental income. Deductible expenses include:

• The housing company’s maintenance charges
• Water bills
• Travel expenses for your trips to the rental property, for showings, for making technical checks or for maintenance and repair. If you drive your private motor vehicle, you can claim 0.30 cents per kilometre on your tax return (for tax year 2023).
• Annual repair expenses
• Depreciation year-to-year if you have undertaken major repairs

Read more about deductions from rental income

Example. You agree with your daughter that she simply pay the maintenance charge for living in your rental apartment. The tax value of a similar apartment, if offered by an employer to an employee as a fringe benefit, equals €500 per month. This means that you are charging below-market rent. Due to a loan connected to the apartment, you need to pay €150 per month in interest expenses.

The only deduction from the rental income would be €300 per month, the amount of the monthly maintenance charge. Even though you have no taxable rental income left after deducting the maintenance charge, you have to report the rental income and associated maintenance charges when you complete your tax return for the year. You cannot claim any interest expenses although you have the loan.