Second property: mortgage interest relief

Liberty__Belle

I owned a house before I met my husband and I get interest relief on it.

We have recently married and bought our family home.

Just wondering if we are entitled to mortgage interest relief on this property too (I still own the other one).

Zamboni

No.

StillWaters

A married couple can only have one PPR. But you can offset some of the interest against rental income.

Citizenpain

Liberty__Belle wrote: »

I owned a house before I met my husband and I get interest relief on it.

We have recently married and bought our family home.

Just wondering if we are entitled to mortgage interest relief on this property too (I still own the other one).

Make sure you transfer your MIR to the new house -- and your husband is allowed claim MIR on the new house as well - If this is is first house he will get FTB rate of relief on 10/13ths of the interest and you will get non FTB rates on 3/13ths of the Interest (assuming you have used your full FTB relief)

Liberty__Belle

Thanks Citizenpain. That is worth knowing.

This is my third property and his first.

To add a problem into the mix, my apartment is on a tracker mortgage and I am afraid to tell the bank it is rented in case they take the tracker from me. So perhaps better off doing nothing.

Citizenpain

I would definitely stop the MIR on the apartment --you dont want revenue after you in years to come. And it's Revenue you ask to switch the MIR, not the bank .

and the MIR is significant for your husband assuming he is a FTB in 2012 -- if your interest is 500 a month his MIR would be worth 1k+ in year one alone

Have you actually checked your mortgage contract to see if you lose the tracker if you switch ?

As an aside . make sure you have appropriate rental property insurance for the apartment

Liberty__Belle

Aha.
I am thrilled you responded to this thread. Thank you for sharing your knowledge.
Great. I will contact revenue tomorrow and ask them to switch it over.


The contract states that I must e living in the apartment. When I made provisional enquiries with the bank about purchasing a new property they assured me they wouldn't take it from me. However, I didn't believe them and got my second mortgage from a different bank.

Citizenpain

Liberty__Belle wrote: »

Aha.
I am thrilled you responded to this thread. Thank you for sharing your knowledge.
Great. I will contact revenue tomorrow and ask them to switch it over.


The contract states that I must e living in the apartment. When I made provisional enquiries with the bank about purchasing a new property they assured me they wouldn't take it from me. However, I didn't believe them and got my second mortgage from a different bank.

I assume your rental income is all declared

Liberty__Belle

no comment

Zamboni

Citizenpain wrote: »

I assume your rental income is all declared

Liberty__Belle wrote: »

no comment

FYP

Declare you income, pay your taxes, transfer MIR to new house and abide by the terms of the mortgage agreements into which you willfully entered.


FFS

StillWaters

Liberty__Belle wrote: »

no comment

As a LL I can tell you that's a fools game. Its practically impossible to do now anyway with Revenue sharing information with DSP and the new property database.

Do your sums, your tax liability will probably be very small, and you don't need to file until next September. But you do need to register with PRTB and NPPR now.

The penalties for non compliance are just too huge to try this under the counter.

riclad

AS a married couple on property where you live now, ,you,ll get twice as much loan interest tax credits,trs,
ie single person 3k limit, couple 6k max limit per year.
you are losing nothing ,stop the interest credit on the old house.i think it will be stopped in 2017
as a landlord you can claim a different tax credit
for loan interest,after you send in tax return ,and register with prtb.
go to bank first ,tell them to stop deducting trs from your mortgage.You can,t claim it as you no longer live there.
I know theres prsi coming in on rental income
.I dont know if its on gross ,or net income after expenses,ie mortgage ,repairs,insurance etc
go to revenue ie, search loan interest TRS
As a SECOND time house buyer ,website says you get 15 per cent
of the interest you pay in a tax year on a mortgage.
OF course you cant transfer it from one house to another.
Every loan is different .
i,m assuming you pay part of the mortgage on the house where you
live with your husband.

Liberty__Belle

Thanks for the comments.

Called revenue today and switched the TRS from the apartment to the house.

This is my third house purchase and my husband's first so it makes a big difference to us.

My problem with declaring the apartment as a rented property is that I have a tracker mortgage that I lose if the property is rented. I cannot afford to do this.

I have always paid my taxes and I actually feel terrible about not doing this properly but the truth is, I would not be able to afford to pay the mortgage if the tracker was taken away and I had to pay tax on the rental income.

sunnysoutheast

Liberty__Belle wrote: »

Thanks for the comments.

Called revenue today and switched the TRS from the apartment to the house.

This is my third house purchase and my husband's first so it makes a big difference to us.

My problem with declaring the apartment as a rented property is that I have a tracker mortgage that I lose if the property is rented. I cannot afford to do this.

I have always paid my taxes and I actually feel terrible about not doing this properly but the truth is, I would not be able to afford to pay the mortgage if the tracker was taken away and I had to pay tax on the rental income.

Don't forget you only pay tax on rental profits, not the gross rent. 75% of mortgage interest and depreciation on F&F are claimable as allowances.

Many people are renting at a loss. I'm not sure why you think this entitles you to avoid paying taxes which are due. In any case I suspect that it will all catch up with you in time. All it will take is a dispute with a tenant who contacts the PRTB and the Revenue.

Liberty__Belle

The tenant is my brother so that is unlikely.

not even wrong

Liberty__Belle wrote: »

but the truth is, I would not be able to afford to pay the mortgage if the tracker was taken away and I had to pay tax on the rental income.

So you "can't afford" to pay your taxes but you can afford this:

Liberty__Belle wrote:

We are building a 4m x 8m sunroom at the back of our house. The back wall will be south facing and the side wall will be west facing.

Thinking of having 3 velux windows on top.

Liberty__Belle wrote:

We are applying for planning because of other issues related to the house.

We are at the stage now of drawing up plans with the engineer.

He suggested 4 windows on the south (3m each) and 3 velux windows.

We are trying to decide if that is enough of if more would be better,

and also doing renovations:

We are renovating a 1970s semi detached house and wondering what heat system to go with.

The house is 113sqm with a planned 24sqm extension.

We are planning insulation as follows:
fill cavity
dry line or external insulation
attic insulation
floor insulation
double (maybe triple glazed if its worth it) windows

sunnysoutheast

Liberty__Belle wrote: »

The tenant is my brother so that is unlikely.

Not unknown for family members to fall out!

D3PO

sunnysoutheast wrote: »

Don't forget you only pay tax on rental profits, not the gross rent..

Why do people keep incorrectly saying rental.profit.

Its wrong wrong wrong. Tax is due on rental INCOME minus dexuctable expenes.

Profit means sweet fa

Citizenpain

For your own sake make sure your insurance cover is adequate for a rental property.

Honestly I would recommend declaring the rental income -- it's unlikely that much tax is due and you just never know how revenue might find out

sunnysoutheast

D3PO wrote: »

Why do people keep incorrectly saying rental.profit.

Its wrong wrong wrong. Tax is due on rental INCOME minus dexuctable expenes.

Profit means sweet fa

You'd better tell the Revenue so.

From the first line of the Introduction of IT70:

"Rental income is computed on the basis of the gross amount of rents receivable. A surplus (profit)....."

D3PO

sunnysoutheast wrote: »

You'd better tell the Revenue so.

From the first line of the Introduction of IT70:

"Rental income is computed on the basis of the gross amount of rents receivable. A surplus (profit)....."

what are you waffling about. That article mentions RENTAL INCOME 6 times in the opening section and doesnt say rental profit once.

if your going to be a smart arse at least make sure your right first. :rolleyes:

But as you clearly don't have a clue what your talking about if you continued to read that same paragraph its made very clear for those that can comprehend english

The rental income chargeable to tax is the aggregate of the surpluses as reduced by the aggregate of the deficiencies. Rental losses occur when the deficiencies exceed the surpluses.

as you clearly don't understand that means income minus expenses = taxable. but hey go file whatever incorrect returns you like. I will be laughing when you get stung for interest and penalties.

Zamboni

Liberty__Belle wrote: »

I have always paid my taxes and I actually feel terrible about not doing this properly but the truth is, I would not be able to afford to pay the mortgage if the tracker was taken away and I had to pay tax on the rental income.

You had 150k in savings which you used to buy a house 300k this year.
You can afford a refurbishment to this house.
You knew you were pregnant but didn't want to mention it to the bank.
And now you won't declare your taxes because you cannot afford it?
You want to keep a tracker on a BTL.

Some people are just all take...

The Revenue will find out about this.
You could be easily identified by your posts on Boards to date.

sunnysoutheast

D3PO wrote: »

what are you waffling about. That article mentions RENTAL INCOME 6 times in the opening section and doesnt say rental profit once.

if your going to be a smart arse at least make sure your right first. :rolleyes:

But as you clearly don't have a clue what your talking about if you continued to read that same paragraph its made very clear for those that can comprehend english

The rental income chargeable to tax is the aggregate of the surpluses as reduced by the aggregate of the deficiencies. Rental losses occur when the deficiencies exceed the surpluses.

as you clearly don't understand that means income minus expenses = taxable. but hey go file whatever incorrect returns you like. I will be laughing when you get stung for interest and penalties.

You do realise that there is a section in that document entitled:

"How Are Rental Profits/Losses Calculated?

Your rental profit or loss is calculated by reference to the rents you are entitled to in any tax year (as opposed to the period to which the income relates).

Example:

<< blah blah>>

A separate rental computation is prepared for each rent or easement whereby the allowable expenditure is deducted from the related rents to arrive at a surplus (i.e. income greater than expenses) or a deficiency (i.e. expenses greater than income) for each. The surpluses and deficiencies are then aggregated to arrive at the rental profits or rental losses for the year."

The Revenue themselves veer between surplus, profit, chargeable income, etc. throughout the document. In this broad context, I believe the terms are synonyms. There may be accounting nuances of which I am not aware, but that's why I pay an accountant to ensure my returns are tickety-boo.

Not sure why you're getting so upset about it to be honest.

Merry Christmas.

riclad

i,m not a tax expert ,but say loan is 12k, rental income is ten k,so profit is zero.
And you can still claim tax credits for mortgage loan interest even if you make no profit .
I THINK the budget brought in prsi on rental income ,
i don,t know how that will be charged .
is the mortgage on a btl not counted as an expense.?
i understand you cannot afford to lose tracker , i hope your tenant doesn,t try to claim tax credits on rent paid.
i wonder how the revenue works ,


ie they can,t even link revenue pcs up to social welfare data network,
i doubt if they have the staff to monitor this forum.
i presume surplus = income ,
deficiencies = expenses in laymans language.
not much point in paying accountant if you make no profit on the btl .

my sister had a btl,she never paid tax ,as she never made a profit,
she sent in tax returns, loan ten k, rental 8k, profit zero.

relax carry on

riclad wrote: »

i,m not a tax expert ,but say loan is 12k, rental income is ten k,so profit is zero.
And you can still claim tax credits for mortgage loan interest even if you make no profit .
I THINK the budget brought in prsi on rental income ,
i don,t know how that will be charged .
is the mortgage on a btl not counted as an expense.?
i understand you cannot afford to lose tracker , i hope your tenant doesn,t try to claim tax credits on rent paid.
i wonder how the revenue works ,


ie they can,t even link revenue pcs up to social welfare data network,
i doubt if they have the staff to monitor this forum.
i presume surplus = income ,
deficiencies = expenses in laymans language.
not much point in paying accountant if you make no profit on the btl .

my sister had a btl,she never paid tax ,as she never made a profit,
she sent in tax returns, loan ten k, rental 8k, profit zero.

Think you are getting a bit confused here. If you have a buy to let property which had a loan taken out to purchase it, you do not get TRS on it as its not your principal private residence. If you had TRS for some reason then you must cancel it.

You are allowed to offset 75% of the interest on the loan against the rental income.

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

Granted since a lot of people took out whopping great mortgages, the interest portion of the loan wipes out a fair bit of the rental income for taxation purposes.

Revenue get information on rental properties from multiple sources. It's not just the rent tax credit claims which are used.

And as this is an anonymous forum, you really never know who's reading. Boo

riclad

Sorry, i,m well aware you can only claim trs ,on your pricipal private residence,eg where you live,
on a btl as you say you can claim tax credits on loan interest,as a landlord,
ie its nothing to do with trs tax allowance.

ONLY If you make a tax return on rental income.and register with prtb as a landlord.Then you can claim landlords tax credit on loan interest on the btl property.
trs can only be claimed for 7 years .
I think you can claim on loan interest ,
but if my total mortgage is 10k, rental income is 8k,
then i presume my net profit is zero.

relax carry on

riclad wrote: »

Sorry, i,m well aware you can only claim trs ,on your pricipal private residence,eg where you live,
on a btl as you say you can claim tax credits on loan interest,as a landlord,
ie its nothing to do with trs tax allowance.

ONLY If you make a tax return on rental income.and register with prtb as a landlord.Then you can claim landlords tax credit on loan interest on the btl property.
trs can only be claimed for 7 years .
I think you can claim on loan interest ,
but if my total mortgage is 10k, rental income is 8k,
then i presume my net profit is zero.

It's the last bit there that you have wrong. From a taxation point of view your total mortgage of 10k has nothing to do with calculating if tax is due on your rental income or not.

For example
Rental income 8000
Minus 75% interest portion of mortgage eg 1700
Minus other expenses of 2000

Total rental income which you may have to pay tax on is 4300.

It's a common misconception that you do not have a tax liability if your rental income is not covering your mortgage payments.

sunnysoutheast

riclad wrote: »

Sorry, i,m well aware you can only claim trs ,on your pricipal private residence,eg where you live,
on a btl as you say you can claim tax credits on loan interest,as a landlord,
ie its nothing to do with trs tax allowance.

ONLY If you make a tax return on rental income.and register with prtb as a landlord.Then you can claim landlords tax credit on loan interest on the btl property.
trs can only be claimed for 7 years .
I think you can claim on loan interest ,
but if my total mortgage is 10k, rental income is 8k,
then i presume my net profit is zero.

I believe that if the gross rental income minus allowable expenses results in a deficit (loss) then there is no income chargeable to tax, yes. Although there is this question of "uneconomic rents" which I don't pretend to understand fully, although I gather it focuses on charging less than a market rent to generate losses to offset against gains elsewhere.

You must be registered with the PRTB to be in a position to claim 75% of the mortgage interest as an allowable expense.

I think the term "tax credits" is used in connection with an individual or couple's personal tax allowances, i.e. the amounts deducted from their income before tax rates are applied.

D3PO

relax carry on wrote: »

It's the last bit there that you have wrong. From a taxation point of view your total mortgage of 10k has nothing to do with calculating if tax is due on your rental income or not.

For example
Rental income 8000
Minus 75% interest portion of mortgage eg 1700
Minus other expenses of 2000

Total rental income which you may have to pay tax on is 4300.

It's a common misconception that you do not have a tax liability if your rental income is not covering your mortgage payments.

This. So many people haven't a clue about their rental tax liability. You pay tax on the income minus expenses not on "profit"

sunnysoutheast

D3PO wrote: »

This. So many people haven't a clue about their rental tax liability. You pay tax on the income minus expenses not on "profit"

Income minus expenses is pretty much the dictionary definition of the word "profit". I fail to see why you are making such a big deal over what is a perfectly valid term to use. The Revenue themselves use surplus and profit interchangeably in their documentation (see above).

Marcusm

D3PO wrote: »

Why do people keep incorrectly saying rental.profit.

Its wrong wrong wrong. Tax is due on rental INCOME minus dexuctable expenes.

Profit means sweet fa

I think you need to be less categoric when you are wrong!!

The charge to tax under Case V of Schedule D in respect of income from Irish property is on the full amount of the profit or gains so arising - section 75(3) TCA 1997. Unlike certain jurisidictions (such as Australia), Irish income tax is generally charged either on the full amount of the income or the full amount of the profits - the statute does not expressly provide for "income less expenses" (except in the case of an investment company).

And just to be clear, profit is what is left over when expenses of a revenue nature reduce the gross receipts of an income nature.

This distinction can be very important in certain circumstances!