Tax on Rental Income

Pentimento

Have just registered the tenants who have taken on my house with PRTB - does this provide a gateway for the Inland Revenue to chase you for tax on rental income or is it simply up to me to fill out the correct forms from Revenue and sort the tax out at the end of the year?

dbran

Tax is a self assessment system so it is up to you disclose if you have rental income and have additional tax to pay.

Having said this the revenue will be aware that you have rental property through the prtb and will get around to chasing you if you fail to disclose the income on your tax return. This may be at a time of your least choosing.

Hope this helps

dbran

Paulyh

i too am in the same boat.........i have rented out a house since the start of the year, it is registered with PRTB and is a social welfare tenant. so as far as i know, i fill out my self assessment form next year, 2010, for the previous year, 2009. is this correct??
i just dont want to get caught out........

Legend100

yeah that is correct PaulyH.

Your 2009 tax year (Jan -Dec) will be due for return in October 2010.

Since you have registered with the PRTB, you are entitled to claim the interest on a mortgage that you may have against the rental property against you rental income for the year

Paulyh

ok.....and as the rental income basically just covers the mortgage on the property, so i dont make any profit on the rent.......how is the my tax calculated?? is it based on profit made??
i'm hiring a retired revenue tax man to look over all my tax stuff soon so hopefully he will make sure i'm good taxwise!! he'll maybe even get some money back from somewhere for me :rolleyes:

Legend100

Yeah basically it is on the profits that tax is charged, if you have a revenue tax man coming to look it you'l be sorted so!

Paulyh

that great, thanks Legend!!

myk

Paulyh wrote: »

ok.....and as the rental income basically just covers the mortgage on the property, so i dont make any profit on the rent.......how is the my tax calculated?? is it based on profit made??
i'm hiring a retired revenue tax man to look over all my tax stuff soon so hopefully he will make sure i'm good taxwise!! he'll maybe even get some money back from somewhere for me :rolleyes:

Careful! If the rental income is covering your mortgage then you are making a profit, unless your mortgage is an interest only mortgage. Mortgage interest under certain circumstances is tax deductible, but the capital element of mortgage payments is certainly not tax deductible!

Paulyh

well no its a variable mortgage........at the moment i dont know what the tax implecations are for me renting the property, if i am going to get screwed on tax i'll just sell it

myk

Paulyh wrote: »

well no its a variable mortgage........at the moment i dont know what the tax implecations are for me renting the property, if i am going to get screwed on tax i'll just sell it

Well speak to your advisor and find out how much your tax liability is likely to be.

Kipperhell

Paulyh wrote: »

well no its a variable mortgage........at the moment i dont know what the tax implecations are for me renting the property, if i am going to get screwed on tax i'll just sell it

Looking at it simply sounds like you might be making a loss. You only claim tax deduction for the interest so just for argument sake say 90% of your mortgage payment is interest at the moment. Mortgage say is 1000 rent is 1050 this would mean you can deduct 900 (90% of 1000) so you pay tax on the difference 150 @ 42% meaning 66 in tax so your total outgoings will be 1066 meaning a loss. That is ignoring all other charges such as PRTB, insurance and maintenance. Further rent reductions are likely and some claim the tax deduction may change radically.

You need to work out the exact costs but that is my understanding

myk

Kipperhell wrote: »

Looking at it simply sounds like you might be making a loss. You only claim tax deduction for the interest so just for argument sake say 90% of your mortgage payment is interest at the moment. Mortgage say is 1000 rent is 1050 this would mean you can deduct 900 (90% of 1000) so you pay tax on the difference 150 @ 42% meaning 66 in tax so your total outgoings will be 1066 meaning a loss. That is ignoring all other charges such as PRTB, insurance and maintenance. Further rent reductions are likely and some claim the tax deduction may change radically.

You need to work out the exact costs but that is my understanding

In such circumstance the person may have a net cash outflow in relation to their rented property, but they certainly aren't making a loss, capital is being paid off on their mortgage.

Paulyh

i agree.........but i seem to be getting mixed advise all the time
is there not allowances for maintainance, contents, service charges etc...
i was hoping, it would more or less cancel each other out. I just need to be able to sit down with someone a get definative advise in black and white about the reality of it all.

myk

Paulyh wrote: »

i agree.........but i seem to be getting mixed advise all the time
is there not allowances for maintainance, contents, service charges etc...
i was hoping, it would more or less cancel each other out. I just need to be able to sit down with someone a get definative advise in black and white about the reality of it all.

Yeah you should find that many costs aside from interest should be tax deductible.

Kipperhell

myk wrote: »

In such circumstance the person may have a net cash outflow in relation to their rented property, but they certainly aren't making a loss, capital is being paid off on their mortgage.

Sorry you are correct I used the word "loss" incorrectly and should have used cost. You are getting a capital in the property too also agreed.

Paulyh wrote: »

i agree.........but i seem to be getting mixed advise all the time
is there not allowances for maintainance, contents, service charges etc...
i was hoping, it would more or less cancel each other out. I just need to be able to sit down with someone a get definative advise in black and white about the reality of it all.

I don't think you are getting mixed signals. No matter what the tax write off you get with a small margin it will not gain any money e.g. maintenance fee of 1000 a year will be an outgoing cost the best you will get is 42% off that still an additional cost to you of 580. I don't think you can write off a rental loss of against any PAYE income but I could be wrong. Maybe if you are self employed and the property was in the business you could?

Note you may have a cost of €100 a month but are getting capital in the property as if you paid the full mortgage. It could mean in years to come you end up with something worth more than the amount of money you put in and at some point it is likely rental income will exceed the mortgage and costs. That is the long term view but you may wish not to risk that and sell and get any profit or take a loss.

PRTB does not inform the tax office of registration but the tax office may request the information on a particular person. It is up to you to fill in the forms correctly. You do not want to be in a situation where the tenant can threaten to report you to the tax office.

dbran

Hi

Just two other important points to note.

1) I believe only 75% of the interest is allowed as a deduction in 2009 and

2) Only the element of mortgage interest that was on the ORIGINAL loan used to purchase the property is allowed. So if you used the property to "trade up" that bit of the interest is NOT allowable against rental income.

Regards

DBran

Paulyh

i didnt mean i was getting mixed advise here........seems that each person i have spoken to over the last while have a different take on things.
i will be filling the tax forms out correctly, abviously with some help:D at the moment i have very little knowledge of tax in this area, i.e. what i am intightled to, and what i have to pay.
i seem to have hijacked the OP's thread a bit so appologies for that!!
thanks for all the advise

Legend100

dbran wrote: »

1) I believe only 75% of the interest is allowed as a deduction in 2009 and

Yeah I was thinking the same dbran but couldn't remember exactly what happened in the budget. It is certainly a key point tho as I'm sure that may put off some potential landlords from going down the rent option. 25% is a fairly hefty cut

Kipperhell

Paulyh wrote: »

i didnt mean i was getting mixed advise here........seems that each person i have spoken to over the last while have a different take on things.
i will be filling the tax forms out correctly, abviously with some help:D at the moment i have very little knowledge of tax in this area, i.e. what i am intightled to, and what i have to pay.
i seem to have hijacked the OP's thread a bit so appologies for that!!
thanks for all the advise

What kind of mixed signals? Most of the different "takes" you will get on things means the one that sound like you are not getting much is the one to take. It is relatively straight forward.

You get to deduct expenses to renting the property each have their rules. You can depreciate furniture and the like over a period of time. Labour costs and repair work is an expense once the place is rented. As pointed out you can now only write off a portion of the interest on the mortgage. You are really best using an accountant the first time and it should cost you about €200. If the rent is just covering the mortgage you certainly have a cost. Rates are going to go up and rent likely down so you really need to work out how much you can afford to pay for the property yourself.

size5

Paulyh wrote: »

i too am in the same boat.........i have rented out a house since the start of the year, it is registered with PRTB and is a social welfare tenant. so as far as i know, i fill out my self assessment form next year, 2010, for the previous year, 2009. is this correct??
i just dont want to get caught out........

Not wanting to throw a spanner in the works on all this, should PH not be paying his preliminary tax for 2010 NOW or is it 2011. If this isn the case should he not register for tax now and start paying the premliminary sum, as otherwise will get hit with a very heavy bill for 2010 i.e. fulltax for 2010 and preliminary tax for 2011.

apologies if I have got this completely wrong

Froggie01

HI

Help please if you can

This may sound a little silly...but....

When doing a rental income statement, i deduct expenses incurred relating to the property from the rent receivable and calculate the tax on the balance.

this is for next years accounts , but....

Is the charge for €200 NPPR allowed as an expense? (like say Bin charges if the landlord paid them)

Is the BER Cert Charge also allowed?

Many thanks

Mr. Incognito

If you want specific advice contact a professional- please read the charter on specific advice- this should cover most questions though

http://www.revenue.ie/en/tax/it/leaflets/it70.pdf

Froggie01

HI

Thanks Mr I,

Its not capital and its wholly and exclusively for the purpose of business, so i would be fairly confident its ok to claim.

I am just doing the 08 stuff, so theres no major rush in anycase. I will contact the Revnue to re confirm for next year at some stage.

I just got a little tongue tied with the idea of claiming tax back on a tax so to speak....for the NPPR charge.

R

Mr. Incognito

Don't know if it is deductible off hand

Here's their FAQ

https://www.nppr.ie/FAQ.aspx

I'd contact them or give Revenue a ring- it's not a charge administered by Revenue says the Revenue website so a quick call would sort if for you- come back and let us know what they say

thenobody

Froggie01 wrote: »

HI

Help please if you can

This may sound a little silly...but....

When doing a rental income statement, i deduct expenses incurred relating to the property from the rent receivable and calculate the tax on the balance.

this is for next years accounts , but....

Is the charge for €200 NPPR allowed as an expense? (like say Bin charges if the landlord paid them)

Is the BER Cert Charge also allowed?

Many thanks

Did you find an answer for your above questions on the nppr and ber cert?

I just found out about the whole nppr thing today and am really non too happy. Very pissed off in fact.
And from here in San Diego and others elsewhere out of the country how do they expect that we know about these things. (yeah yeah i know they dont care - retorical question really)
Typical Ireland though.
Since everyone renting their property should be signed up with the prtb they should get the list and send out notices for something this big.

Legend100

The NPPR tax is not an allowable expense against rental income.

http://www.taxireland.ie/taxadvice/35760.aspx

thenobody

What about the ber cert?

Legend100

not too sure about the BER cert

i know its allowable as a business expense for developers but not sure about personally for income tax.

maybe give revenue a call for clarification