rent out or sell? and tax implications

castleking1

Hi folks

I currently live in a 3 bed-semi and have started to build a new house to live in.
I would love to hold onto my 3-bed and rent it out.
Is it worth the hassle?
And what is the tax implications of such a move.
The mortgage on the 3-bed is 100K
And the rent I would expect in our area is between 100-140 per week.

Anyone in a similiar situation.

Ticktactoe

castleking1 wrote: »

Hi folks

I currently live in a 3 bed-semi and have started to build a new house to live in.
I would love to hold onto my 3-bed and rent it out.
Is it worth the hassle?
And what is the tax implications of such a move.
The mortgage on the 3-bed is 100K
And the rent I would expect in our area is between 100-140 per week.

Anyone in a similiar situation.

Your rental income would be included in your total income and taxed accordingly i.e if you work and your PAYE income is 30,000 and your rental income is 5200 then your total income for the year will be 35200. This would be taxed @ 20% depending on your personal circumstances. i.e married, single etc. If your income pushes you into the higher tax bracket then your income over that bracket is taxed @ 41%.

Relevant expenses for the appartment can be deducted so to reduce your rental income.
There is also the €200 tax for second properties i.e any property that is not your PPR (principle private residence).

If your rental income is over 3,200 (I think this is the figure but you can check on revenue.ie) then you will have to submit your yearly return Form 11E. So if you starting renting this year 2010 you will have to submit your return before October 2011 for this year (or November 2011 if submitted via ROS). The tax on your rental income will then be due after your form is submitted. You will also have to pay PREM tax which on your first year of submitting the form will be Nil.

Best advise is talk to a tax officer in your local tax office or if you cant make it in, give your local office a call and ask for the self assessing section.

Hope this helps!

castleking1

Thanks for that ticktacktoe.

JoeTurner

A few random thoughts:

1 - If you rent out the property you'll need to register it with the Private Residential Tenancies Board (www.prtb.ie) in order to deduct the mortgage interest from the gross rental income before the tax is calculated.....

2 - If you rent out the property and sell it at a profit in the future you may have a capital gains tax liability. Any gain will be apportioned between the time it was your principal private residence and the time it's rented out for before selling...

3 - If you rent out the property furnished make sure you keep a full inventory of all contents as you'll receive a wear and tear allowance which will again reduce any tax payable. I've had a few clients in similar circumstances who haven't kept complete lists of inventory and have probably missed out on tax savings as a result....

Mr. Incognito

Their is a clawback if you availed of stamp duty for first time buyers if you dispose of the property within two years- given the fact the mortgage is only 100K I'm guessing this is not the case.

Basically you can only claim interest relief on your principal private residence so you would lose that on your current home but you will be able to deduct certain expenses from the renal income- check out the stickies for a guide on rental income.