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Renting rooms out will exceed €7,620

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  • 19-09-2007 8:50pm
    #1
    red dave
    Closed Accounts Posts: 845 ✭✭✭


    Hi there,
    At the moment I own the property I'm living in and I'm renting one bedroom out for €500 per month (will just type pm instead of per month from here on). The mortgage payments are €1500 pm so there is another room that I will be putting a bed into and hope to rent it out for €350 pm.

    Checking out the Rent A Room scheme the max to rent out is €7620 per year tax free. If I rent both rooms out as planned the total will be €10,200 and deduct average of bills etc I end up with €8840 earned in the year.

    So that's €1220 over the limit. Is this €1220 the only taxable part or the full €8840?

    If it is the full amount, how do I work out what tax I should be paying. I want to figure this out before I rent it out and get the nastiest surprise by the tax man further down the line.

    thanks in advance

    dave


Comments

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    #2
    jdivision
    Registered Users Posts: 4,260 ✭✭✭jdivision


    You have to pay tax on the full amount, income tax rates apply


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    #3
    kleefarr
    Registered Users Posts: 5,743 ✭✭✭kleefarr


    jdivision wrote:
    You have to pay tax on the full amount, income tax rates apply

    Really?

    What's the point of the "Rent A Room scheme the max to rent out is €7620 per year tax free." Then?

    Just asking, I'm not clued up on this particular topic. ;)


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    #4
    red dave
    Closed Accounts Posts: 845 ✭✭✭red dave


    thanks for reply,
    right so it seems it would be best to charge €635 per month between the two rooms and pay the €865 rather than charge €350 for the smaller unless I add up the deductables and add this onto the rent that I would be charging so it would be approx €748 pm so keep the same rate €500 for current room and say €240 for future room and at the end of the year put the part that is over down as deductable for split of bills etc.


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    #5
    Victor
    Registered Users Posts: 78,400 ✭✭✭✭Victor


    The objective is to provide places cheaply to tenants by using available capacity, while helping people to pay their mortgage.

    Potentially, as we are near the end of the year, you will have €6,000 in rent from your first lodger. This mean you can earn €1,620 from the other in the next 3 months = maximum €540 per month (a little rich).

    Then next year, adjust the rents to the maximum of €7,620 between them. Note this amount includes everything, rent, bills, food, etc.

    Alternatively you end up paying income tax on a most/all of the rent at 41%.


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