Quick question on rental income

ElKavo

Hi Guys,

I'm a bit unsure as to the ins and outs of this. I have got different answers from different people. I am going to rent a property it is my only property and was our family home. Are we liable to pay tax on the income if it is below 10k PA? As I say it is our only property. on the revenue website it says

"Where an individual lets a room (or rooms) in his or her sole or main residence as residential accommodation, the income may be exempt from income tax where the aggregate of the gross rents and any sums for meals or other services supplied in connection with the letting is below a certain threshold, (€10,000 for the tax year 2010 & 2011). "

This is under the rent a room relief but as it is our only property does this apply? I'll ring revenue to be sure but if anyone has a definitive answer that would be great.

punisher5112

That only applies if you live there also.

Otherwise its simply classed as a business even though you could be losing money.

You must register with revenue and also prtb.

Hope that helps.

ElKavo

Yeah, I spoke to revenue, my god their delightful. Looks like I will be loosing 20% + usc + prsi what a stupid system..... Grrrrrrrr :mad::mad:

relax carry on

ElKavo wrote: »

Yeah, I spoke to revenue, my god their delightful. Looks like I will be loosing 20% + usc + prsi what a stupid system..... Grrrrrrrr :mad::mad:

Why is it a stupid system? You are about to rent out your property and receive income for it. That income, depending on your allowable expenses for offset may leave you with a tax liability.

Mrs OBumble

ElKavo wrote: »

Yeah, I spoke to revenue, my god their delightful. Looks like I will be loosing 20% + usc + prsi what a stupid system..... Grrrrrrrr :mad::mad:

You're being taxed on business income, like any other business person. So it was your faimily home - it's not any more, so what's the problem with that?

But I gotta ask - what other income do you have? If it's above 35k per year, then you will be taxed at 42% + USC + PRSI on your rental income less allowable expenses.

Eldarion

You know if you stay there a number of nights during the week then rent out a spare room or two, unless it exceeds 10k PA then you're not tax liable.

I dunno how the tax man knows where you're spending your nights though...

That being said you won't be able to charge anywhere near as much rent as you would if you rented out the house as a whole. Depending on the area you could be looking at a difference of 1.5k per month for the house versus 350 per month for a room. You might come out ahead even with the tax.

ElKavo

relax carry on wrote: »

Why is it a stupid system? You are about to rent out your property and receive income for it. That income, depending on your allowable expenses for offset may leave you with a tax liability.

The idea of "don't feed the trolls" comes to mind...

No, I say its a stupid system because, should I stay in a house that doesn't suit, Id get tax relief on my mortgage. Now that I want to make a move to a better area with better prospects and less of a commute I'm going to be hammered! I'll get max of €700 pm in rent. my mortgage is 5 odd Ill be paying 1k for the rental of a new property. I'll get no relief on the new property rent and I'll be charged the guts of 30% tax on the 700 that I will receive in rental income - expenses. Plus I'll loose any relief on the mortgage interest (trs) too.

Don't think it really needs any further explanation.

The_Morrigan

ElKavo wrote: »

The idea of "don't feed the trolls" comes to mind...

No, I say its a stupid system because, should I stay in a house that doesn't suit, Id get tax relief on my mortgage. Now that I want to make a move to a better area with better prospects and less of a commute I'm going to be hammered! I'll get max of €700 pm in rent. my mortgage is 5 odd Ill be paying 1k for the rental of a new property. I'll get no relief on the new property rent and I'll be charged the guts of 30% tax on the 700 that I will receive in rental income - expenses. Plus I'll loose any relief on the mortgage interest (trs) too.

Don't think it really needs any further explanation.

It's not the revenues fault that your house is no longer fit for purpose. You are the one making the move, they are not forcing you.

Borderfox

Mrs OBumble wrote: »

You're being taxed on business income, like any other business person. So it was your faimily home - it's not any more, so what's the problem with that?

But I gotta ask - what other income do you have? If it's above 35k per year, then you will be taxed at 42% + USC + PRSI on your rental income less allowable expenses.

Unlike any other business you can only claim back 75% of mortgage interest in relief. Big thanks to the government for all the help in running their social housing experiment

Eldarion

ElKavo wrote: »

The idea of "don't feed the trolls" comes to mind...

No, I say its a stupid system because, should I stay in a house that doesn't suit, Id get tax relief on my mortgage. Now that I want to make a move to a better area with better prospects and less of a commute I'm going to be hammered! I'll get max of €700 pm in rent. my mortgage is 5 odd Ill be paying 1k for the rental of a new property. I'll get no relief on the new property rent and I'll be charged the guts of 30% tax on the 700 that I will receive in rental income - expenses. Plus I'll loose any relief on the mortgage interest (trs) too.

Don't think it really needs any further explanation.

He's not trolling. Despite all you've said his point is still completely valid. Income is income, it's liable for tax. That being said a lot of the rental expenses can be offset against that tax.

ElKavo

It would seem that I will have a fair bit of expenses in setting the house up for the rental. So hopefully I will be able to reduce my tax liability as much as possible. I will also be using a management company so Ill be able to claim that back too... Anyone know a good cheap accountant?

ElKavo

Borderfox wrote: »

Unlike any other business you can only claim back 75% of mortgage interest in relief. Big thanks to the government for all the help in running their social housing experiment

Mortgage interest is tiny. I was smart enough to recognize that a .95% tracker was the smart move when taking out the mortgage.:cool: but every little helps... wait hope I don't infringe on a copyright there.

Baby01032012

Don't forget pre letting expenses are not allowable deduction for tax purposes.

riclad

IF you , lived in the house,
you can earn up to 10k,
tax free , its called rent a room scheme.
YOU can claim accountant fees,agent fees, insurance ,
maintenance,other expenses
cost of new cooker,fridge as expenses against tax .
eg buy fridge, claim tax credits over an 8 year period.
say fridge is 800 , you get 100 euro tax credits per year.

MAKE sure you register with the PRTB before you send in a tax return.
Cost 200 euros.

The tax on landlord s makes no sense to me in that ,
you could be getting 500 rent, mortgage is 800 per month,
and you could be still taxed on a VIRTUAL ,non existant
profit ,
cos for example,you are paying a low interest on the loan.
eg most of the 800 is capital repayments.
FOR certain landlord s .
eg you cant claim tax credits on the capital part of your mortgage.
SO in the taxmans view ,you are making a profit .
which must be taxed.


profit should be taken AS income after all expenses ,
including the mortgage payments on the rental property.

ElKavo

Baby01032012 wrote: »

Don't forget pre letting expenses are not allowable deduction for tax purposes.

Did not know that. So I have to wait until the property is let then put the stuff into it? Sorry that doesn't make much sense, So If I kit the house out with pots pans plates cutlery appliances etd before the tenant moves in its my tough and I can't claim anything back on that?

Thanks

ElKavo

riclad wrote: »

IF you , lived in the house,
you can earn up to 10k,
tax free , its called rent a room scheme.
YOU can claim accountant fees,agent fees, insurance ,
maintenance,other expenses
cost of new cooker,fridge as expenses against tax .
eg buy fridge, claim tax credits over an 8 year period.
say fridge is 800 , you get 100 euro tax credits per year.

MAKE sure you register with the PRTB before you send in a tax return.
Cost 200 euros.

Thanks, The agent is to do all the registering stuff and contracts. Guess thats why I'm paying them.

Mrs OBumble

ElKavo wrote: »

No, I say its a stupid system because, should I stay in a house that doesn't suit, Id get tax relief on my mortgage. Now that I want to make a move to a better area with better prospects and less of a commute I'm going to be hammered! I'll get max of €700 pm in rent. my mortgage is 5 odd Ill be paying 1k for the rental of a new property. I'll get no relief on the new property rent and I'll be charged the guts of 30% tax on the 700 that I will receive in rental income - expenses. Plus I'll loose any relief on the mortgage interest (trs) too.

Don't think it really needs any further explanation.

Oh, I agree that this side of it is stupid (assuming you cannot sell due to negative equity - otherwise that's the obvious solution).

But the issue is that government policy is designed to encourage you to stay in the first house you buy, rather than facilitate changes as your family and employment needs change.

IMHO, good policy in this are would allow you to claim a portion of your own rental payment as a deductable expense against your rental income, and it would remove the "first home owner" relieft becasue their nett effect is reduced labour market mobility.

But it's not Revenue's fault that this isn't the law at the moment.

Time to start lobbying your TD.

Baby01032012

ElKavo wrote: »

Did not know that. So I have to wait until the property is let then put the stuff into it? Sorry that doesn't make much sense, So If I kit the house out with pots pans plates cutlery appliances etd before the tenant moves in its my tough and I can't claim anything back on that?

Thanks

Pre letting expenses not allowable. Appliances are capital items which you can claim capital allowances on,basically writing cost off against income over life of appliance. Why would you buy plates pots pans etc. these are not a necessity of renting.

ElKavo

Mrs OBumble wrote: »

Oh, I agree that this side of it is stupid (assuming you cannot sell due to negative equity - otherwise that's the obvious solution).

But the issue is that government policy is designed to encourage you to stay in the first house you buy, rather than facilitate changes as your family and employment needs change.

IMHO, good policy in this are would allow you to claim a portion of your own rental payment as a deductable expense against your rental income, and it would remove the "first home owner" relieft becasue their nett effect is reduced labour market mobility.

But it's not Revenue's fault that this isn't the law at the moment.

Time to start lobbying your TD.

Negative equity is quite large so sale isn't a real option. I aggree complete on your point and it's a shame that the policy makers don't seem to live in the real world. for now it looks like I'll have to reduce my liability as much as possible.

thanks

relax carry on

ElKavo wrote: »

The idea of "don't feed the trolls" comes to mind...

No, I say its a stupid system because, should I stay in a house that doesn't suit, Id get tax relief on my mortgage. Now that I want to make a move to a better area with better prospects and less of a commute I'm going to be hammered! I'll get max of €700 pm in rent. my mortgage is 5 odd Ill be paying 1k for the rental of a new property. I'll get no relief on the new property rent and I'll be charged the guts of 30% tax on the 700 that I will receive in rental income - expenses. Plus I'll loose any relief on the mortgage interest (trs) too.

Don't think it really needs any further explanation.

I get that you are upset that you feel that you must become a landlord. However in becoming a landlord you are operating a business and are subject to the taxation rules for rental income.
If you feel that the system should be altered to cater for people in your position then it's time to start lobbying politicians.

By the way I do not appreciate the troll comment. I asked a question and provided you a brief outline of the taxation of rental income. Subject to new rules being introduced the below link will assit you.
http://www.revenue.ie/en/tax/it/leaflets/it70.html

riclad

HE probably means , repairs ,insurance etc
payments due before you get your first tenant.
BY all means buy cups ,plates ,etc, in may, rent out in june you should still get tax credits.
for something big, eg 400 euro fridge,
i,d buy it on the last day in may,
PAY for it on june 1st .
SAY you rent out june 1st,
you,ll only be able to claim ,for 6 months ,june to december.
INSURANCE cost,
as you only had a tenant for 6 months of the tax year.

GET an accountant ,
and look on revenue.ie landlord tax allowances .
You have to keep all documents ,and reciepts,for 6 years,
in respect of the rental property,

I don,t think the tax man expects you to rent out a empty house on june 1st ,
and buy all fixtures,fittings,furniture on june 2nd.
if you bought a fridge 3 months ago ,
i doubt if you can claim tax credits for it.
i could be wrong.

There.s alot of landlord s paying tax ,
on houses in negative equity,
even though the profit they make is close to zero euros.
MAYBE buy new cups,pots, plates etc just before you get the 1st
tenant .
ie 1 week before .
I,M not sure how strict they are on that issue.

http://www.irishlandlord.com
lots of info here.

ElKavo

relax carry on wrote: »

I get that you are upset that you feel that you must become a landlord. However in becoming a landlord you are operating a business and are subject to the taxation rules for rental income.
If you feel that the system should be altered to cater for people in your position then it's time to start lobbying politicians.

By the way I do not appreciate the troll comment. I asked a question and provided you a brief outline of the taxation of rental income. Subject to new rules being introduced the below link will assit you.
http://www.revenue.ie/en/tax/it/leaflets/it70.html

It was meant toung in cheek. Im sure your lovely...

Thanks for the helpfull feedback.:)

ElKavo

riclad wrote: »

http://www.irishlandlord.com
lots of info here.

Excellent site, thanks. Does anyone know if there is a definitive list as to what you have to supply in the house?

Thanks

Thargor

riclad wrote: »

IF you , lived in the house,
you can earn up to 10k,
tax free , its called rent a room scheme.
YOU can claim accountant fees,agent fees, insurance ,
maintenance,other expenses
cost of new cooker,fridge as expenses against tax .
eg buy fridge, claim tax credits over an 8 year period.
say fridge is 800 , you get 100 euro tax credits per year.

MAKE sure you register with the PRTB before you send in a tax return.
Cost 200 euros.

The tax on landlord s makes no sense to me in that ,
you could be getting 500 rent, mortgage is 800 per month,
and you could be still taxed on a VIRTUAL ,non existant
profit ,
cos for example,you are paying a low interest on the loan.
eg most of the 800 is capital repayments.
FOR certain landlord s .
eg you cant claim tax credits on the capital part of your mortgage.
SO in the taxmans view ,you are making a profit .
which must be taxed.


profit should be taken AS income after all expenses ,
including the mortgage payments on the rental property.

Hi, see the bit in bold, is that against any tax? So if Im renting rooms in my house and working I could offset those expenses against my PAYE on my real job or is that wishful thinking? Thanks.

ElKavo

OK I've done up a rough guide as to what I think are expenses that I can claim back against tax on income. Can anyone in the know let me know if these are realistic and actually claimable?

mortgage interest @75% total yearly = 1134
Management Fees = 600 @50€; pm
Insurance Premium = 400 est
Legal fees = 100
Prtb reg fee = 200
Mortgage PP = 250 est
Cost of repairs and maint @12.5% pa = Unknown
Property Tax = 90

Total = 2147

Rental income = 8400

Tax @ 30% on rental income = 2520

Actual liability for tax on rental income = 373 ?

Are my figures correct here or should it be

Rental Income = 8400
Minus total expenses = 2147

actual income = 6253

Tax @ 30 of rental income = 1845.9?

Any one who is doing these returns I would appreciate it if you could tell me which one is correct?

Thanks

Blured

ElKavo wrote: »

OK I've done up a rough guide as to what I think are expenses that I can claim back against tax on income. Can anyone in the know let me know if these are realistic and actually claimable?

mortgage interest @75% total yearly = 1134
Management Fees = 600 @50€; pm
Insurance Premium = 400 est
Legal fees = 100
Prtb reg fee = 200
Mortgage PP = 250 est
Cost of repairs and maint @12.5% pa = Unknown
Property Tax = 90

Total = 2147

Rental income = 8400

Tax @ 30% on rental income = 2520

Actual liability for tax on rental income = 373 ?

Are my figures correct here or should it be

Rental Income = 8400
Minus total expenses = 2147

actual income = 6253

Tax @ 30 of rental income = 1845.9?

Any one who is doing these returns I would appreciate it if you could tell me which one is correct?

Thanks

Its the second calc - Tax is done on rental profit, not rental income.

Your PRTB fee looks too high and Im pretty sure Property Tax isnt an allowable expense. Also - would your tax not be at the higher rate?

djimi

Baby01032012 wrote: »

Why would you buy plates pots pans etc. these are not a necessity of renting.

I agree with this. As a tenant I dont want someone elses cutlery, crockery, pots and pans etc, and if they were there I wouldnt use them. Save yourself some money and dont bother providing this sort of stuff; its not expensive for the tenant to buy for themselves and most will be happy to Id imagine.

sunnysoutheast

ElKavo wrote: »

OK I've done up a rough guide as to what I think are expenses that I can claim back against tax on income. Can anyone in the know let me know if these are realistic and actually claimable?

mortgage interest @75% total yearly = 1134
Management Fees = 600 @50€; pm
Insurance Premium = 400 est
Legal fees = 100
Prtb reg fee = 200
Mortgage PP = 250 est
Cost of repairs and maint @12.5% pa = Unknown
Property Tax = 90

Total = 2147

Rental income = 8400

Tax @ 30% on rental income = 2520

Actual liability for tax on rental income = 373 ?

Are my figures correct here or should it be

Rental Income = 8400
Minus total expenses = 2147

actual income = 6253

Tax @ 30 of rental income = 1845.9?

Any one who is doing these returns I would appreciate it if you could tell me which one is correct?

Thanks

It's basically the second one, but more complex. Taxable income is gross rent minus allowable expenses and capital allowances.

LPT is not yet confirmed claimable (although many people do).
Repair expenses are fully claimable in the tax year of their occurence.
Capital allowances are available over 8 years, even on items already in the property when the rental starts.

ElKavo

Blured wrote: »

Its the second calc - Tax is done on rental profit, not rental income.

Your PRTB fee looks too high and Im pretty sure Property Tax isnt an allowable expense. Also - would your tax not be at the higher rate?

Thanks for reply, Looks For some reason I thought it was 200... It should be 90 per tenancy.

On the IPOA website it says that the Property Tax is deductible from rental income. Or has this not come into place yet?

Don't think this will push me into the higher rate of tax or at least not all of it into the higher rate.

Either way I'm close enough to the actual mortgage on the property PM that I shouldn't be all too much in the red when renting this property. Maybe 2 - 500€ pa.

Which I can live with.

ElKavo

sunnysoutheast wrote: »

Capital allowances are available over 8 years, even on items already in the property when the rental starts.

Does the capital spend not have to occur within the tenancy?

I.E. I have a 2.5k wardrobe in the house. Installed before we moved in 7 years ago. Can I claim 1 year of 2.5k @12.5% or 8 years... Same for appliances?

Thanks

Blured

ElKavo wrote: »

On the IPOA website it says that the Property Tax is deductible from rental income. Or has this not come into place yet?

http://www.revenue.ie/en/tax/lpt/pqs/week-ending-20130203.html

Revenue wrote:

The Thornhill Group recommended that the Local Property Tax paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates. This is not provided for in the Finance (Local Property Tax) Act 2012; it is the intention of the Government to introduce such a provision on a phased basis but the manner in which this will happen has not been decided. Such change would be provided for by primary legislation.

So looks like the intention is that it will be a deductible but that it has not yet been provided for in legislation