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Renting Out House

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  • 31-01-2006 1:21pm
    #1
    bennyc
    Registered Users Posts: 1,907 ✭✭✭


    I am looking at renting out my house and will be moving to a new one
    Am I correct in saying that I will have to pay 40% of the rent income on tax.
    Is there a way I can just use that to pay off the existing loan on that house and cut down on the tax bill

    Thanks


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    #2
    Reyman
    Registered Users Posts: 1,297 ✭✭✭Reyman


    Need a lot more information to answer that question. Have you a loan out on the house ? What tax rate are you currently paying ?

    For sure you will have to pay 20% CGT on any capital appreciation of the house. This is separate to the income tax liability


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    #3
    bennyc
    Registered Users Posts: 1,907 ✭✭✭bennyc


    Two of us on the lower tax rate if that s whet you need. Not married yet but that will change this year. Have a loan of about 120,000 left to pay on the house interest rate is around 3.8% not 100% on this.
    I have been going in loops here on wheather to sell or not but if I have to pay tax on the rent I get then I dont think it would be manageable.
    I have another motgage on the new house and will need another 30K to finish off. I was thinking of getting that on the smaller mortgage as it will cost me as much in fees, hopefully as I was told i am unable to get a top up on the new loan it will have to be another mortgage (more fees)


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    #4
    Hitchhiker's Guide to...
    Registered Users Posts: 3,322 ✭✭✭Hitchhiker's Guide to...


    bennyc wrote:
    I am looking at renting out my house and will be moving to a new one
    Am I correct in saying that I will have to pay 40% of the rent income on tax.
    Is there a way I can just use that to pay off the existing loan on that house and cut down on the tax bill

    Thanks

    emmm - did you see the post directly underneath this, where a near similar question was answered?


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    #5
    Reyman
    Registered Users Posts: 1,297 ✭✭✭Reyman


    You will have to pay tax at your marginal rate, which seems to be 20%.
    You can set any loan interest you're paying against this and a reasonable figure against depreciation of the house fittings and necessary repairs.

    It will no longer be your main dwelling and you will have to pay CGT on the capital appreciation (as I mentioned).

    I'm not sure how the current rental market is but if you do the sums i've a feeling the yields might be very low. If you consider the current inflated property market it might be better to sell and move your free money into Rabo (just my opinion)


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    #6
    antoinolachtnai
    Registered Users Posts: 9,787 ✭✭✭antoinolachtnai


    I would think long and hard before taking Reyman's advice (you need to take into account principle growth, which isn't a strength of Rabobank's, the effect of borrowing, whether you really need a lot of spare cash at your current stage of your life and what you would do with excess cash if you didn't have the house to put it in.)


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    #7
    RainyDay
    Closed Accounts Posts: 6,925 ✭✭✭RainyDay


    Check out the Askaboutmoney.com key post on 'sell home or keep as investment for a full discussion on all the issues involved.


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    #8
    Greenhorse
    Closed Accounts Posts: 35 ✭Greenhorse


    hey People,

    Would I be right in saying that you could transfer the house which you intend to rent into a company structure and all the mortgage interest you pay per month would be tax deductable agains any rental income.

    eg. Rent of e500 pm. interest of e350 per month. therefore only pay tax at martinal rate on the e150 (the difference)

    rgds,

    Niall

    .


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    #9
    antoinolachtnai
    Registered Users Posts: 9,787 ✭✭✭antoinolachtnai


    Why would you need to transfer it into a company to do this?

    By using a vehicle to own your property you could be opening yourself to having to pay a chunky extra capital gains tax charge.

    Worth a trip to the accountant.


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    #10
    Greenhorse
    Closed Accounts Posts: 35 ✭Greenhorse


    Hi,

    I wasnt sure that I had it correct. Thanks for bringing up the cgt.

    Niall

    .


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    #11
    RainyDay
    Closed Accounts Posts: 6,925 ✭✭✭RainyDay


    Greenhorse wrote:
    hey People,

    Would I be right in saying that you could transfer the house which you intend to rent into a company structure and all the mortgage interest you pay per month would be tax deductable agains any rental income.

    eg. Rent of e500 pm. interest of e350 per month. therefore only pay tax at martinal rate on the e150 (the difference)

    rgds,

    Niall

    .
    You don't need to transfer to a company to achieve this. Mortgage interest is a tax deductible expense regardless of whether the property is owned by a company or an individual. In general, it is not a good idea to transfer a property to a company - it's just too hard to get money out the company without getting hit for cgt and/or income tax. You also take on serious obligations about company reporting to the CRO, with heavy fines if you are late. There are some rare circumstances when it may be beneficial - but you'd most definitely need professional advice on your own particular circumstances before going down this road.


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