People see the potential for capital appreciation and the prospect of long term rental income as being very attractive. But what many people don’t realise is that these properties could and probably should be held through a Revenue approved pension plan.
The reason why more people don’t adopt this approach tends to be because they feel ‘pensions’ are complicated. However given the right advice and clear explanation they quickly come round to the idea of holding property in their pension plans.
Here are just a few of the reasons for adopting such an approach;
1) Rental income from property held in a pension plan accumulates free from income tax and PRSI. If it is held personally it is taxed accordingly.
2) If the property is sold the proceeds are free from capital gains tax, again if the property is held personally the CGT of 33% is payable.
3) Contributions made to the pension plan either to pay the mortgage or generate the cash to buy the property can be offset against personal tax- saving up to 41% in the process.
Obviously property via pension plan does have it downsides. The main disadvantage is that you cannot access your pension until you retire. However if your sole purpose is to acquire an asset that will build up in value as quickly as possible and then realise that value when you retire – Why would you not buy property via your pension?
If you have any questions or would like to discuss this topic further please feel free to contact either Joe or Duncan at Inverdea Financial Services on 0404 67123.