Renting House

Jorus

Hi, I am just wondering if anyone can answer my question:
We have had our house on the market, Co. Cork, but it is not selling so we are looking at renting it out. If we rent it out for about 850-900 Euro a month and our mortgage payment is above that - do we still have to declare it and pay tax on the income eventhough we wont be making any profit on it? It is our only house - not an investment property.

First time buyers dont seem to be buying anything at the moment - so renting it is the only option until they decide to start buying again!!

BoozyBabe

Well, if you rent out the house, where'll you be living?
If you're not living in it & other people are & paying you the privilege for it, then yes, it's an investment property.

Yes, you have to declare the income. I don't exactly know how the tax works. Someone like Smccarrick will explain that better for you, but regardless, you have to register the tenancy with the PRTB & the Rental income with the Revenue

If you rent out rooms in your house while you still live there, then I think you're exempt from paying tax on it.
(But, that income might have a limit on how much you can make before you have to pay tax on it.)

A Random Walk

Jorus wrote: »

First time buyers dont seem to be buying anything at the moment - so renting it is the only option until they decide to start buying again!!

Then your price is too high. Anything will sell at the right price. The property industry has been utterly wrong this year, I would be wary of trusting them when they say the market will pick up next year.

On the renting question, if you're living in the house you may be able to avail of the rent a room scheme. Leaving aside that scheme, for tax purposes you can only deduct the interest on the mortgage, so yes even if your mortgage exceeds the rent you can be liable for tax (and are you receiving mortgage interest relief already?). Also you should read up on the clawback rules for FTBs where you rent out a house within 5 years of purchasing it (if relevant).

Jorus

we were going to move home and rent it out for 6 months or so, get a few loans etc paid off with the money we would save. - until hopefully we can sell it next year or so.
If we have to pay the tax on it - it might not be worth it - and we were FTB when we bought it a couple of years ago so we might not be able to rent it out anyway.
I will defo look into it - thanks a mill for the info

jdivision

Because you're making a loss I don't think you'd be liable for tax on it. However, depending on how long you've owned the house you might be liable for stamp duty on its purchase.

The_Conductor

Just because you are not making a profit, does not necessarily mean you do not have a tax liability.

Mortgage interest, and only the interest component mind, is an allowable expense, on the original mortgage should you rent out your house. This only relates to the original mortgage on your house (aka- if you have had equity releases on your home, or if you have remortgaged for the purpose of buying your new home, the interest on the remortgaged portion is *not* a tax deductable expense).

Further- you cannot continue to claim preferential rates of Mortgage Interest Relief on your first home (First Time Buyers get higher mortgage interest relief than other buyers), as you are no longer resident in the house- so your outgoings could actually be considerably higher than you anticipate. You can claim the preferential rate of relief on your mortgage for your new home (preferential mortgage interest relief is for the first 7 years after your first property purchase, and is not necessarily tied to your first Principle Permanent Residence (PPR)).

You will have to pay the full whack of stamp duty on the new house, as you have now exhausted your FTB rights in this regard.

Sale of the house is governed by your asking price- it is entirely possible that house prices may tumble quite a bit further with the 2 interest rate increases that have been signalled by the ECB board president Jean-Claude Trichet (as inflation rates are well above their 2% target). It is a serious gamble hoping that you'll sell in the new year- later next year, if there is no interest in your property now.

S.

jdivision

you may also me liable for stamp duty on the house you currently own and want to rent out. I should have explained that part better