Query-Renting out House

MRyan1981

Hello to all,
I was hoping somebody might be able to clarify a few things about renting out my house please.

Firstly, I bought my house in July 2007. I was a first time buyer & didn’t pay stamp duty. As far as I can make out from other posts I will not have to pay back the stamp duty with the new claw back. Is this correct?

I know when I plan to rent out my house I will have to register with the PRTB & will need to ring my mortgage bank to let them know I will be renting out my house so they will stop my Mortgage Interest Relief at source.

Like most people if not all, my house is now only worth less than half of what I paid for it & with mortgage payments rising & income level dropping I feel as though my only option is to move back home & try to rent out my house. I also know I can’t complain too much, I’ve only a fraction of other people’s mortgage & I’m working but it’s still tough! I have been trying to calculate what rental income I would get out of the house after taxes are paid. Hope you can make sense from my workings J.

Rent in my area is aprox €500-€600 per month. My mortgage is €649 at the minute, it will probably go up by aprox €138 per month when Interest Relief has been taken bringing my mortgage back up to €787. This means I will be paying €287 myself anyway. I take it this will not make any difference to tax I will be paying??

Here is the way I have been calculating....

12 Month Rent @ €500 per month: €6000.00

Less:
Mortgage Interest (138x12x75%) €1242.00
PRTB ( i think this is €70 pa) € 70.00
House Insurance € 400.00
Cleaning/Painting/Maintenance € 100.00
Depreciation (€500x12%) € 60.00
Light/Heat (to be paid by tenant) € 0.00

Taxable Income: €4128.00

Tax @ 20% (rate my pay is) € 825.60
PRSI @ 2% € 82.56
USC €4128 @ 2% € 82.56

Annual Tax to be Paid: € 990.72

Am I totally wrong??
Is the tax paid annually on your end of year return?

Thanks for your time
Shelly

uberwolf

you also need to consider that your mortgage bank may have the right to amend the margin based on the change of use.

D3PO

your missing other items you cant do an exact but

NPPR tax will be another cost you have that isnt tax deductable

most people suggest you budget for 11 months occupancy not 12

deprection of €500 ? is that the total value of furniture etc your leaving ? seems very low to me

prtb is per tennancy not per annum just an fyi

if you use an accountant to file your returns you can write off that expense

if your driving to collect the rent you can claim a mileage expense the figure is on the revenue site i think its about 50 cent per km

ultimatly you should have enough to offset any taxable liability year on year I suggest.

however do remember that when selling the house your taxable requirments as an investment property need to be considered re capital gains

troops

MRyan1981 wrote: »

Mortgage Interest (138x12x75%) €1242.00

if you receive trs of 138 per month then is your interest paid each month not equal to 5x138= 690 (trs is 20%) therefore can you not write off 75% of 690?

i could be wrong but that's my understanding

MRyan1981

Thanks guys for replies.

Uberwolf-could the banks really amend the Margin...I suppose any excuse!!

D3PO : Just checked the NPPR Tax...Another €200...great J

Depreciation is only an aprox figure..as i have been & intended to be living in the house I have not kept receipts for anything, well apart from electrics....would they take my word for costs?
I don’t get the whole capital gains tax.....is this 20% tax on the whole selling price or a tax on profit you’d make from the house? I see there is I have been reading aboaut capital gains but cannot get my head around it. I did read though: ‘A gain on the disposal of a principal private residence including grounds of up to one acre is exempt, provided the house had been occupied by the individual as his/her only or main residence during the individual's period of ownership’. I’ve been living in the house the last 3 years & not planning on renting forever...but will the capital gains still make a big impact if & when I do decide to sell?

Troops-I don’t have my TRS statement with me....so again the TRS figure is only an aprox. I’m paying €649 mortgage per mth...but MOST of that is unfortunately interest!! It’s always so depressing to see the statement every year...Amount I’ve paid in compared to how much has been taken off from the actual mortgage L

Thanks again

OMD

MRyan1981 wrote: »

I don’t get the whole capital gains tax.....is this 20% tax on the whole selling price or a tax on profit you’d make from the house? I see there is I have been reading aboaut capital gains but cannot get my head around it. I did read though: ‘A gain on the disposal of a principal private residence including grounds of up to one acre is exempt, provided the house had been occupied by the individual as his/her only or main residence during the individual's period of ownership’. I’ve been living in the house the last 3 years & not planning on renting forever...but will the capital gains still make a big impact if & when I do decide to sell?
]

I am open to correction but my understanding of current Capital Gains tax rules are:If you sell the house within 1 year of starting to rent it out you will not have to pay any Capital Gains tax. Otherwise you will be liable to Capital Gains tax on any increase in property value from current levels, if you decide to sell in the future.
So for example. If you bought the house for €200,000. If it is now worth €100,000 but you sell it in 5 years time for €120,000 you will be liable for Capital Gains tax on the €20,000 gain you have made, despite the fact that you have really made a loss of €80,000.

dearg lady

OMD wrote: »

I am open to correction but my understanding of current Capital Gains tax rules are:If you sell the house within 1 year of starting to rent it out you will not have to pay any Capital Gains tax. Otherwise you will be liable to Capital Gains tax on any increase in property value from current levels, if you decide to sell in the future.
So for example. If you bought the house for €200,000. If it is now worth €100,000 but you sell it in 5 years time for €120,000 you will be liable for Capital Gains tax on the €20,000 gain you have made, despite the fact that you have really made a loss of €80,000.

incorrect.

CGT is based on your purchase price-selling price.
If you reckon the house is now worth half what you paid, the chance of you turning a profit on sale any time soon is unlikely.

Also, IF there is a gain (profit) when you to sell it will be time apportioned,

e.g. You bought the house for 200,000 in Jan 2007, and sell it in Dec 2013 for 250,000, you have rented it out from Jan 2012-dec 2013.

Your liablility to CGT would be as follows:
250,00-200,000=50,000 gain
PPPR Relief, period of occupation 7/8 (note last year is deemed to be occupied whethere or not it actually is)
50,000*7/8 = 43,750

50,000-43,750 =6,250 gain

Note you also have an annual personal exemption, if you haven't already used this, you can take it off,

6,250 - 1,270 = 4,980

4,980 *25% =1,245= CGT Liabilty

i think this is right, but I feel as though I've missed soemthing...been a while since I've done any CGT calcs!

OMD

dearg lady wrote: »

incorrect.

CGT is based on your purchase price-selling price.
If you reckon the house is now worth half what you paid, the chance of you turning a profit on sale any time soon is unlikely.

Also, IF there is a gain (profit) when you to sell it will be time apportioned,

e.g. You bought the house for 200,000 in Jan 2007, and sell it in Dec 2013 for 250,000, you have rented it out from Jan 2012-dec 2013.

Your liablility to CGT would be as follows:
250,00-200,000=50,000 gain
PPPR Relief, period of occupation 7/8 (note last year is deemed to be occupied whethere or not it actually is)
50,000*7/8 = 43,750

50,000-43,750 =6,250 gain

Note you also have an annual personal exemption, if you haven't already used this, you can take it off,

6,250 - 1,270 = 4,980

4,980 *25% =1,245= CGT Liabilty

i think this is right, but I feel as though I've missed soemthing...been a while since I've done any CGT calcs!

As I said I was open to correction. I was thinking of renting out my Principle Private Residence during the boom. The financial advice I got at the time was that I needed a value on the house at that time and that Capital gains tax would only be on any increase from that date not on the initial purchase price.

MRyan1981

Thanks Dearg Lady..At last CGT makes some bit of sense