Rent my own house out and move to rental

toe_knee

OK, I am planning on renting out my own house. The mortgage is about 560 and I should be able to rent it out for 500 making a loss of 60. I want to move closer to town and rent would be cost around 700.
I am at the very early stages here and am trying to get information on stuff like would I have to pay tax on the rent I receive and can I offset that against the tax that I am paying?

Should I go to an accountant for this information or would a property management agency have this information?

All advise and guidance hugely appreciated

dearg lady

Have a look at the Revenue website for information on rental income. In a nutshell you will owe tax at your marginal rate on rental income. Rental income is calculated as rent less allowable expenses. Note the full mortgage repayment is not allowable, only 75% of the interest portion of the mortgage.

rcdk1

dearg lady wrote: »

Have a look at the Revenue website for information on rental income. In a nutshell you will owe tax at your marginal rate on rental income. Rental income is calculated as rent less allowable expenses. Note the full mortgage repayment is not allowable, only 75% of the interest portion of the mortgage.

While it is likely that he would pay tax on the rental income at the marginal rate, would it not depend on whether his other income (PAYE etc) exceeds the Standard Rate Cut-off Point?

An accountant might be a good idea but I wouldn't have much faith in Management Companies.

OP, you should get well acquainted with:
Revenue guide to Rental Income: http://www.revenue.ie/en/tax/it/leaflets/it70.html
Residential Tenancies Act: http://www.irishstatutebook.ie/2004/en/act/pub/0027/index.html
PRTB website: http://public.prtb.ie/

dearg lady

rcdk1 wrote: »

While it is likely that he would pay tax on the rental income at the marginal rate, would it not depend on whether his other income (PAYE etc) exceeds the Standard Rate Cut-off Point?

An accountant might be a good idea but I wouldn't have much faith in Management Companies.

OP, you should get well acquainted with:
Revenue guide to Rental Income: http://www.revenue.ie/en/tax/it/leaflets/it70.html
Residential Tenancies Act: http://www.irishstatutebook.ie/2004/en/act/pub/0027/index.html
PRTB website: http://public.prtb.ie/

I specified at OP's marginal rate, as in the rate applied to his last euro of income earned, I didn't specify the higher rate

rcdk1

dearg lady wrote: »

I specified at OP's marginal rate, as in the rate applied to his last euro of income earned, I didn't specify the higher rate

We seem to be on the same page so to speak, just the definition of Marginal Rate differs. To be fair, a quick Google shows your "last euro earned" definition seems to be the more common and correct, although some define it as simply the higher rate (e.g. http://www.taxireland.ie/taxadvice/34860.aspx).

Chris_5339762

Dont forget to let your bank know as some have a different interest rate for people renting rather than owner-occupying.

mikemac1

Inform your insurance company

I don't know if they'll alter the premium but if anything happens they won't be slow to cancel on you

So best to inform them
Or at least ring them up and ask the question for a friend

toe_knee

Thanks for the advise. I think I have a lot of reading to do.
By the look of things I will probably need an accountant which is another expense that I haven't anticipated. The more I look into this the more it puts me off doing it. Seems like an awful lot of work to be done

athtrasna

toe_knee wrote: »

Thanks for the advise. I think I have a lot of reading to do.
By the look of things I will probably need an accountant which is another expense that I haven't anticipated. The more I look into this the more it puts me off doing it. Seems like an awful lot of work to be done

Your accountant expenses are tax deductible

Merch

Dont forget NPPR and maybe the charge.

toe_knee

Chris_5339762 wrote: »

Dont forget to let your bank know as some have a different interest rate for people renting rather than owner-occupying.

Could this affect my mortgage contract??

quietsailor

toe_knee wrote: »

Could this affect my mortgage contract??

In some cases yes -- there are stories doing the rounds of the internet (I emphasise STORIES, I have not seen it myself so it could be bullsh*t) that people who change from owner occupier to LL (landlord) have to change mortgage types - the STORIES seem to be about people on tracker mortgages as it suits the banks to get people of tracker mortgages.

As regards Insurance. You have to get a different type of insurance. LLs need public liability more so than home owners. To give you an idea of price I paid €930 for LL insurance this year, I'm an owner occupier living in Cork City.


Here's another thread from someone asking the same questions as you about renting out a house for the first time.

Merch

OP maybe consider doing a rent a room thing, if you are planning to live near to the area of the property anyway. You will have more rights/control, plus the costs involved might outweigh the benefits in a renting out/renting yourself situation.
There is capital gains possibly also if letting (thats when/if you sell, although that might not apply).
The cost of renting somewhere yourself also will have to be subtracted to see if it is beneficial.
It might be better to do it up on paper/excel and see the costs, it could be worth renting rooms and staying there yourself and then paying for petrol/transport.
Unless there are other factors you haven't mentioned (i.e. don't want to mention here, which is fine).

Bannasidhe

quietsailor wrote: »

In some cases yes -- there are stories doing the rounds of the internet (I emphasise STORIES, I have not seen it myself so it could be bullsh*t) that people who change from owner occupier to LL (landlord) have to change mortgage types - the STORIES seem to be about people on tracker mortgages as it suits the banks to get people of tracker mortgages.

I can confirm this does happen. My lender sent me a letter last year stating that according to 'their records' I do not live in my house (I do!) and were therefore changing my tracker to a variable.
Took 2 months of increasingly stroppy emails to get them to back off.
It turned out that they reached this decision due to the fact that the only bank account I had with them was a (dormant student) current account (opened in 1980 and not used since 1983 :eek:) which still used my mother's address...

Merch

I would say they would use anything to get someone off a tracker, even an excuse, if you dont dispute it they are up, but in the case of a change of use to rental or occupancy of the owner to somewhere else, I'd say they are likely within their rights OP (however I'd confirm that by checking your contract).