Renting out Home

PaddyCar

I purchased my first property 2 years ago and have been living in it ever since. My work location is now changing and I will be moving to another part of the country were I will be renting a property for around 18 months.
If I was to rent out my house how would the tax payable be calculated? Is there any deduction if it is your only property and does it take into account the rent i will be paying?
Thanks in advance

tinkerbell

No, it is all counted as additional income so you will be taxed on that, as well as USC etc.

FishOnABike

Do you intend renting out your house long term or just short / medium term while transitioning to your new job + location?

Is it being let furnished or unfurnished ? If furnished there may be a depreciation allowance for furnishings and appliances. There may also be deductible expenses such as advertising / estate agent / management agent / accounting fees. There may also be implications for your mortgage, mortgage interest relief (if you got in before the close), non principal primary residence tax, house insurance, transferring utilities accounts to the tenant etc...

If this is your first time as a landlord I'd advise you to get the advice / assistance of someone experienced in the field to ensure you are fully aware of all of your rights and obligations.

Penguino

You will pay high taxes on your rental income. You can offset expenses against these incomes to reduce your liability but ultimately it will end up costing you money.

The tax on rent paid in 2015 will be due by end of Oct 2016

Desmonddoyle

FishOnABike wrote: »

Is it being let furnished or unfurnished ? If furnished there may be a depreciation allowance for furnishings and appliances. There may also be deductible expenses such as advertising / estate agent / management agent / accounting fees. There may also be implications for your mortgage, mortgage interest relief (if you got in before the close), non principal primary residence tax, house insurance, transferring utilities accounts to the tenant etc...

Just to note that the NPPR has been scrapped, and you will only be liable for the standard property tax.

FishOnABike

Desmonddoyle wrote: »

Just to note that the NPPR has been scrapped, and you will only be liable for the standard property tax.

Thanks for that. Just goes to show the need for expert advice.

PaddyCar

Thanks for replies. If i were to rent out 2 of the rooms on an individual basis under the rent a room scheme would i avoid paying such high taxes. This way i still would also still have accommodation if i was back visiting.

Michael D Not Higgins

PaddyCar wrote: »

Thanks for replies. If i were to rent out 2 of the rooms on an individual basis under the rent a room scheme would i avoid paying such high taxes. This way i still would also still have accommodation if i was back visiting.

You could get €12,000 a year tax free on the rent-a-room scheme. That includes all bills, etc that could be contributed to by the licencee. It must be declared to Revenue but as long as you're below the limit there's no tax due.

It also benefits from the licencees not having the same protection under the law as they don't qualify as tenants and you're not obliged to register with the PRTB. This also means evicting is easier.

Graham

Michael D Not Higgins wrote: »

You could get €12,000 a year tax free on the rent-a-room scheme. That includes all bills, etc that could be contributed to by the licencee. It must be declared to Revenue but as long as you're below the limit there's no tax due.

It also benefits from the licencees not having the same protection under the law as they don't qualify as tenants and you're not obliged to register with the PRTB. This also means evicting is easier.

Doesn't the landlord need to be ordinarily resident in the property to avail of the rent a room scheme.

Edit: Yes

Qualifying Residence
4.1 Sole or main residence
The room or rooms must be in a residential premises that is situated in the State and
that is occupied by an individual as his/her sole or main residence during the
particular tax year. An individual may live in more than one residence but can only
avail of rent-a-room relief in respect of his/her sole or main residence. In general, an
individual’s sole or main residence is that individual’s home for the greater part of the
time and where friends and correspondents would expect to find him/her. The
individual does not have to own the residence and it could, for example, be occupied
as rented accommodation.

Source: http://www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-32.pdf

Michael D Not Higgins

Graham wrote: »

Doesn't the landlord need to be ordinarily resident in the property to avail of the rent a room scheme.

Edit: Yes

Yes, I was getting this mixed up with another thread "Renting out my house" which has had a similar vein of responses, where this had already been clarified to that thread's OP.

OP, you would need to be living in the house to avail of the rent-a-room scheme.

adrianw

Mrs OBumble wrote: »

Which might be quite possible if you spend your weekends there, may regular mid-week visits, go there when you're on annual leave, only rent a room in a house (not a whole house) in the other town etc, and still get all your mail at your own house.

If the OP is living close enough to spend his weekends in his house and to make regular mid-week trips, why would he bother renting a house or room in a different location?

delthedriver

If you can afford it, do not rent out your house at all.


What ever about buying an investment property and having it trashed, but having your own home trashed ????


Thankfully I have had many good tenants, unfortunately there are some who could break your wallet !

filbert the fox

Qualifying Residence
4.1 Sole or main residence
The room or rooms must be in a residential premises that is situated in the State and
that is occupied by an individual as his/her sole or main residence during the
particular tax year. An individual may live in more than one residence but can only
avail of rent-a-room relief in respect of his/her sole or main residence. In general, an
individual’s sole or main residence is that individual’s home for the greater part of the
time and where friends and correspondents would expect to find him/her. The
individual does not have to own the residence and it could, for example, be occupied
as rented accommodation:eek::eek::eek::eek:

Surely leases prohibit this sort of thing. Also this must have implications for insurance.

It beggars belief that Revenue would allow a tenant to avail of a tax free subletting in a dwelling provided by a Landlord who pays over half of his income as tax/prsi/usc?

adrianw

filbert the fox wrote: »

Qualifying Residence
4.1 Sole or main residence
The room or rooms must be in a residential premises that is situated in the State and
that is occupied by an individual as his/her sole or main residence during the
particular tax year. An individual may live in more than one residence but can only
avail of rent-a-room relief in respect of his/her sole or main residence. In general, an
individual’s sole or main residence is that individual’s home for the greater part of the
time and where friends and correspondents would expect to find him/her. The
individual does not have to own the residence and it could, for example, be occupied
as rented accommodation:eek::eek::eek::eek:

Surely leases prohibit this sort of thing. Also this must have implications for insurance.

It beggars belief that Revenue would allow a tenant to avail of a tax free subletting in a dwelling provided by a Landlord who pays over half of his income as tax/prsi/usc?

How would a tenant be able to avail of a tax free subletting?

Michael D Not Higgins

adrianw wrote: »

How would a tenant be able to avail of a tax free subletting?

This is a strange one from the Revenue. How many head tenants who operate subletting for landlords actually declare the income under rent-a-room? How many are over the limits and should pay tax? Should the landlord have to pay tax again on the income? It's all a bit of a muddle really.

adrianw

I think if one individual rents a four bed house for €1,000 a month and then takes in three housemates and reduces his / her rent by charging the others €300. He/she is not making a profit, he/she is just diving the rent in an unfair way, but they are not earning any money.

If one person moves out for a month, the head tenant still has to pay the full rent. It would want to be a massive house to exceed the €12k a year threshold.

Michael D Not Higgins

adrianw wrote: »

I think if one individual rents a four bed house for €1,000 a month and then takes in three housemates and reduces his / her rent by charging the others €300. He/she is not making a profit, he/she is just diving the rent in an unfair way, but they are not earning any money.

If one person moves out for a month, the head tenant still has to pay the full rent. It would want to be a massive house to exceed the €12k a year threshold.

I don't think the rent a room scheme accounts for that overhead, in the same way that you can't offset rental income against your mortgage or rent outgoings.

adrianw

This is true Michael. however, i think revenue would accept the head tenant is just the intermediary.

However, if this was an issue, just because you are not entitled to a relief does not mean you are obliged to claim it.

Therefore if you did rent a whole house for €12,000 and take in three housemates the €12,000 rent paid to the landlord would be deductible. So I do not believe a taxable profit is ever going to arise.

filbert the fox

adrianw wrote: »

How would a tenant be able to avail of a tax free subletting?

The tenant has a lease with the landlord. I would imagine that no subletting is a standard clause in the lease. So I'm mystified as to how Revenue can allow such a scenario to arise.

adrianw

Apologies Flibert, but I am not understanding how a tenant who sublets could be at an advantage over a landlord.
Maybe you could provide an example (assuming no such clause exists.)?

Thank you.

filbert the fox

adrianw wrote: »

Apologies Flibert, but I am not understanding how a tenant who sublets could be at an advantage over a landlord.
Maybe you could provide an example (assuming no such clause exists.)?

Thank you.

Ok let's see.

I let my 3-bed property to a married couple (A & at €750 per month or €9000 per annum. This is now their Principal Private Residence.

One month later they use the other two bedrooms to accommodate two other persons (C & D) as rent-a-rooms under the scheme. They charge the occupants say €75 each per week. This totals €600 per month or €7200 per annum.
As this is below the €12,000 limit they are apparently entitled to pocket this €7200 tax free whereas I pay effectively half of my income as tax on €9000.

Mrs OBumble

adrianw wrote: »

If the OP is living close enough to spend his weekends in his house and to make regular mid-week trips, why would he bother renting a house or room in a different location?

You obviously haven't met some of the people I work with.

The short answer is to avoid two 1.5 hour drives (there and back) each day.

Some folks with jobs that sort of distance stay in the work-location on Mon, Tues and Thurs, and travel home for Wed night and the weekend. Or some variations, depending on the nights of whatever at-home activities they want to keep up.

Obviously not an option if the job is in Cork and house in Donegal. But most of the country is not that far away.

adrianw

Filbert, while you receive €9,000 in rent, you will then deduct the allowable interest portion of your mortgage and other expenses. So your taxable income will be significantly less than €9,000.

Also, while it is possible, i would find it hard to imagine that two individual would agree to pay what would be 40% of the rent each when they represent 25% of the individuals using the house.
However, even if they did. Couple A&B are still paying €1,800 a year to live in a three bed house with two strangers. Their share if divided by bedrooms would be €6,000 so they are 'making a profit' of €1,200 for the inconvenience of sharing the house with two other people. Personally I would say the inconvenience outweighs the €100 a month.

filbert the fox

adrianw wrote: »

Filbert, while you receive €9,000 in rent, you will then deduct the allowable interest portion of your mortgage and other expenses. So your taxable income will be significantly less than €9,000.

Also, while it is possible, i would find it hard to imagine that two individual would agree to pay what would be 40% of the rent each when they represent 25% of the individuals using the house.
However, even if they did. Couple A&B are still paying €1,800 a year to live in a three bed house with two strangers. Their share if divided by bedrooms would be €6,000 so they are 'making a profit' of €1,200 for the inconvenience of sharing the house with two other people. Personally I would say the inconvenience outweighs the €100 a month.

Adrian,

I don't think €11 a night for 7 nights or €15 a night for 5 nights is "disagreeable" to individuals C & D.

They don't know anything about the couple A & B - only that this nice couple are providing good value accommodation - which, we are told is currently a scarce resource. So the sense of injustice you argue is lost on them.

The tenants (A & have been provided with a 3-bed semi in superb condition and in full compliance with the Standards Regulations, property tax paid, Prtb registered, and so on. They now pay a paltry €1800 nett a year in rent for the house that they don't own, are not particularly worried about, don't have to insure, replace carpets, fix faults, maintain heating systems, etc.
They are not in the least bit inconvenienced.

They can use this incredible loophole in the rentaroom scheme to extract tax free money from an honestly provided resource rented to them in good faith.

The landlord is now paying more tax per annum than the tenants pay in rent.

filbert the fox

filbert the fox wrote: »

The tenant has a lease with the landlord. I would imagine that no subletting is a standard clause in the lease. So I'm mystified as to how Revenue can allow such a scenario to arise.

Some houseshares operate with a head tenant who does all the dealing with the LL, pays the rent to him (and is responsible for it) and essentially runs the house and gets the people in for the other rooms.

It probably happens by accident rather than design, for instance I lived in a place where a person moved in with friends, they all moved out so he was the only tenant left on the lease and he found people for all the rooms (me being one of them) so essentially he was subletting but the LL obviously had no issues as it was a houseshare anyway.

filbert the fox

Kasen Brave Yearbook wrote: »

Some houseshares operate with a head tenant who does all the dealing with the LL, pays the rent to him (and is responsible for it) and essentially runs the house and gets the people in for the other rooms.

It probably happens by accident rather than design, for instance I lived in a place where a person moved in with friends, they all moved out so he was the only tenant left on the lease and he found people for all the rooms (me being one of them) so essentially he was subletting but the LL obviously had no issues as it was a houseshare anyway.

With respect I'm referring to the bizarre scenario set out in post no. 25 where there is the possibility of a state sponsored business arrangement whereby a tenant uses someone else's property for tax free gain.

athtrasna

The OP asked about the implications of renting their house out and once again such a thread develops into a how to profit from rent a room thread. Enough please.

Mod

sunnysoutheast

filbert the fox wrote: »

With respect I'm referring to the bizarre scenario set out in post no. 25 where there is the possibility of a state sponsored business arrangement whereby a tenant uses someone else's property for tax free gain.

We rented two family houses in SE UK in 2012-2013, and "rent to let" was already prevalent there. Agents and landlords were on their guard against it and carried out regular inspections.

Given that there is a mod warning on this thread already I will not go into specifics, but it is obvious that there is an opportunity for the unscrupulous to take advantage of the 12k a year exemption. I would be surprised if it's not happening widely already.