Interest on borrowed money is allowable as an expense against rental income.
The borrowed monies must have been used for the purchase, improvement or repair of the rented premises.
Only 75% of the interest due for the year is allowable. From 01.01.17 this rises to 80%
From 1st January 2016 where the rental property is let to tenants in receipt of certain social housing supports for a period of three years, the landlord may claim the disallowed 25% of the interest at the end of the three year period. The landlord must put in a claim to the Revenue to receive it. The landlord must also submit a Declaration of Undertaking to the PRTB at the start of the tenancy.
Where a qualifying loan is replaced by another loan, interest paid on the replacement loan is not in strictness deductible as it is to replace existing loan and not for the purchase, improvement of repair of the rented premises. However Revenue practice is to treat the interest on the replacement loan as being deductible if the existing loan was being replaced for genuine commercial reasons, on an arms length basis and not for the avoidance of tax.