Renting out my house Help Needed

lyonsd78

Sorry for the bother guys. If anyone can help me out I'd be hugely grateful.

So; work is bringing myself and my wife to England in the next couple of months.

We have tried to sell our home, but it has been very slow.

We are now thinking of renting out the house.

We currently pay 1450 per month mortgage but will lose tax relief when we rent which means our mortgage would rise to 1720. An agent says we should be able to get 1700 per month rent for the home.

So I guess that covers the mortgage as a basic step.

However, I am finding the TAX very difficult to work out. I am getting conflicting reports on it when I Google it.

Could anybody tell me how the tax would be worked out and how much we are likely to have to pay in tax at the end of each year? It makes all the difference between us renting out the property or keeping it on the market. Thanks a mill.

Uriel.

lyonsd78 wrote: »

Sorry for the bother guys. If anyone can help me out I'd be hugely grateful.

So; work is bringing myself and my wife to England in the next couple of months.

We have tried to sell our home, but it has been very slow.

We are now thinking of renting out the house.

We currently pay 1450 per month mortgage but will lose tax relief when we rent which means our mortgage would rise to 1720. An agent says we should be able to get 1700 per month rent for the home.

So I guess that covers the mortgage as a basic step.

However, I am finding the TAX very difficult to work out. I am getting conflicting reports on it when I Google it.

Could anybody tell me how the tax would be worked out and how much we are likely to have to pay in tax at the end of each year? It makes all the difference between us renting out the property or keeping it on the market. Thanks a mill.

The rate of tax you pay will be dependent on your own tax circumstances, but you will pay - income tax, PRSI, USC (I think). As you will be resident outside of Ireland, your tenants will be obliged to withhold 20% of the rent for Revenue.

You can write a number of expenses off your tax bill though:

• 75% of the mortgage interest (note you cannot write off the €1720, it's only the interest.
• Agent Fees
• Advertising
• PRTB Fees
  

You will need to register with PRTB

Uriel.

Uriel. wrote: »

The rate of tax you pay will be dependent on your own tax circumstances, but you will pay - income tax, PRSI, USC (I think). As you will be resident outside of Ireland, your tenants will be obliged to withhold 20% of the rent for Revenue.

You can write a number of expenses off your tax bill though:

• 75% of the mortgage interest (note you cannot write off the €1720, it's only the interest.
• Agent Fees
• Advertising
• PRTB Fees
  

You will need to register with PRTB

If he has an agent rent does not need to be withheld.

Michael D Not Higgins

Elianna Late School wrote: »

If he has an agent rent does not need to be withheld.

Only if they're paying to the agent and not into the OP's account.

lyonsd78

Thanks for your input guys; really appreciate it.

I can't really afford to pay more than what we get in for rent. I just can't afford to supplement it in any way, shape or form. Next year is going to be tight.

Does anybody know if I go down to talk to AIB (Mortgage lenders) could I be honest with them and tell them I'm getting 1700 per month for rent; I also need to pay the tax - can you amend my mortgage repayments so that I don't fall below the amount of rent I'm bringing in?

Would the banks do something like that?

Uriel.

lyonsd78 wrote: »

Thanks for your input guys; really appreciate it.

I can't really afford to pay more than what we get in for rent. I just can't afford to supplement it in any way, shape or form. Next year is going to be tight.

Does anybody know if I go down to talk to AIB (Mortgage lenders) could I be honest with them and tell them I'm getting 1700 per month for rent; I also need to pay the tax - can you amend my mortgage repayments so that I don't fall below the amount of rent I'm bringing in?

Would the banks do something like that?

You would be looking at effectively extending the term of the mortgage to reduce the monthly payment..

You can still take in your 1,700 rent per month to cover the mortgage but the following year you will need to settle your tax bill, probably in a lump sum payment

Uriel.

Elianna Late School wrote: »

If he has an agent rent does not need to be withheld.

Depends on the scope of the agent's job. If the agent is just to arrange tenants and handle maintenance etc. Then tenants would still need to withhold rent. I have an agent in place but the rent comes directly to me

gaius c

lyonsd78 wrote: »

Thanks for your input guys; really appreciate it.

I can't really afford to pay more than what we get in for rent. I just can't afford to supplement it in any way, shape or form. Next year is going to be tight.

Does anybody know if I go down to talk to AIB (Mortgage lenders) could I be honest with them and tell them I'm getting 1700 per month for rent; I also need to pay the tax - can you amend my mortgage repayments so that I don't fall below the amount of rent I'm bringing in?

Would the banks do something like that?

I don't really see the benefit of doing something like this and you'll only alert them to the fact that you're renting it out and leaving yourself open to being put on a higher BTL interest rate.

If I had a choice between switching to a BTL rate and taking a slight hit on rent vs mortgage payment, I'd be sucking up the latter.

lyonsd78

Thanks again...

I know this question is probably impossible to answer, but can anybody give me a ballpark figure on what the tax bill would be at the end of each year. Am I talking a couple of grand? Five grand? Upwards of five grand

I've been researching it online for the past few days and can't get my head around this at all.

I can see why some people don't declare this sort of thing at all. I'm so tempted by not declaring but my wife wouldn't be able to get through it.

Michael D Not Higgins

lyonsd78 wrote: »

We currently pay 1450 per month mortgage but will lose tax relief when we rent which means our mortgage would rise to 1720. An agent says we should be able to get 1700 per month rent for the home.

lyonsd78 wrote: »

I can't really afford to pay more than what we get in for rent. I just can't afford to supplement it in any way, shape or form. Next year is going to be tight.

I think you have your answer already. All the advice will be to base your income on a rent free month each year, i.e. you'll get 11 months of rent a year. Now you're down 1700 and 11*20, 220, total 1920.

Then let's say you're getting 22.5% TRS at the moment, your interest is €1200 per month which you can write off 900. Let's say one month's rent as agent fees. Let's say 20% tax rate, your tax bill is now €1240.

You're down over €3000 for the year, i.e. you have to supplement the mortgage €3000 to keep above water. These are just example figures, but because you're taking in less than your mortgage you'll never fully cover it from the rent alone.

Mrs OBumble

Michael D Not Higgins wrote: »

Let's say 20% tax rate, your tax bill is now €1240.

If the OP is being moved to England for work, then s/he will likely become subject to English tax on his foreign-rental income as well (with a tax-credit for tax already paid to Ireland). I have no idea what the tax rates are there, but suspect they'll be higher than 20%.

OP, I wouldn't rely on getting tax advice from randoms on the internet. Find yourself and accountant with expertise in the area.

Michael D Not Higgins

Mrs OBumble wrote: »

If the OP is being moved to England for work, then s/he will likely become subject to English tax on his foreign-rental income as well (with a tax-credit for tax already paid to Ireland). I have no idea what the tax rates are there, but suspect they'll be higher than 20%.

OP, I wouldn't rely on getting tax advice from randoms on the internet. Find yourself and accountant with expertise in the area.

I said they were only example figures. It gives a ballpark of what would be required, as I don't know the entire story of the OP's financial situation with the mortgage.

Since the OP mentioned they can't afford to supplement the mortgage above the rent received, I showed that it's not possible on the numbers supplied.

Uriel.

Uriel. wrote: »

Depends on the scope of the agent's job. If the agent is just to arrange tenants and handle maintenance etc. Then tenants would still need to withhold rent. I have an agent in place but the rent comes directly to me

If the agent does all the dealing with the tenants how do they even know the LL lives abroad?

Uriel.

Elianna Late School wrote: »

If the agent does all the dealing with the tenants how do they even know the LL lives abroad?

The landlord's address on the lease.
Maybe the LL wants payment into his/her foreign bank account.

Michael D Not Higgins

Elianna Late School wrote: »

If the agent does all the dealing with the tenants how do they even know the LL lives abroad?

A tenant is entitled to the contact details, name and address of the landlord.

That's assuming he won't use an Irish address, say his home house for correspondence to do with things in Ireland. They also may not look for his address, I don't know the address nor asked for an address from my LL, never even met the man and that's with dealing with him directly not through an agent. It's a houseshare though with no leases or paper work and room let individually so a bit different in fairness.

It's just a bit mad to me that a tenant should be getting involved in this when they may not have a clue where the LL is. Surely it should be up to the Ll to make a tax return at the end of the year rather than this messy situation.

Uriel.

Elianna Late School wrote: »

That's assuming he won't use an Irish address, say his home house for correspondence to do with things in Ireland.

It's just a bit mad to me that a tenant should be getting involved in this when they may not have a clue where the LL is. Surely it should be up to the Ll to make a tax return at the end of the year rather than this messy situation.

It is an obligation for the tenant. Why bother with the line of thought to get around this issue?

Uriel.

Uriel. wrote: »

It is an obligation for the tenant. Why bother with the line of thought to get around this issue?

And if the tenant is given an Irish address for the LL what can they do? My LL could be on the moon for all I know, that said I'm positive he does live in Ireland but he could quite easily be abroad such is the tiny amount of contact I have with him (phone call about once or twice a year).

I'm coming at this from a tenants perspective rather than the LL avoiding having money retained btw.

Michael D Not Higgins

Elianna Late School wrote: »

That's assuming he won't use an Irish address, say his home house for correspondence to do with things in Ireland.

It's just a bit mad to me that a tenant should be getting involved in this when they may not have a clue where the LL is. Surely it should be up to the Ll to make a tax return at the end of the year rather than this messy situation.

Yes it's crazy, but it's easier for Revenue to chase the people resident in the country for tax owed than non-residents. I'm not even sure if they're chasing the tenants for the tax.

Uriel.

Elianna Late School wrote: »

And if the tenant is given an Irish address for the LL what can they do? My LL could be on the moon for all I know, that said I'm fairly positive he does live in Ireland.

I don't know, maybe ask the question of the LL?

Maybe if you were given an Irish Address and Bank Account by your LL, but it was actually the case the LL was non resident, Revenue would not find out, or if they did, would treat you reasonably given the information that you have been supplied with suggested the LL was resident.

sunnysoutheast

Uriel. wrote: »

I don't know, maybe ask the question of the LL?

Maybe if you were given an Irish Address and Bank Account by your LL, but it was actually the case the LL was non resident, Revenue would not find out, or if they did, would treat you reasonably given the information that you have been supplied with suggested the LL was resident.

Some time ago I think somebody posted on here some judgements that seemed to suggest that the address on the most recent lease covering the tenancy would determine the tenant's obligation if they had not been notified of any change.

In any case I think a landlord would be unwise in the extreme to rely on a tenant paying the 20% over. Just appoint a resident collection agent.

athtrasna

lyonsd78 wrote: »

I can see why some people don't declare this sort of thing at all. I'm so tempted by not declaring but my wife wouldn't be able to get through it.

That would be illegal.

lyonsd78

Is this possible?

I've just been made redundant and we can't afford to pay the mortgage on the house we currently have.

We were thinking of reducing to interest only and then renting out the house. Is this a goer, or would the bank not allow me to go interest only if we are going to be getting back some decent money in rent?

Sorry for the simple question.

ohnonotgmail

where are you going to live while you rent out the house?

spaceHopper

You can get help from social welfare with the mortgage and talk to the bank you might not have to move out. Did you get redundancy money you haven't had time to try to get a new job you might get lucky or are you taking time out too

Victor

spaceHopper wrote: »

You can get help from social welfare with the mortgage

Note that Mortgage Interest Supplement is closed to new applicants and will be phased out completely by 2018.

Victor

lyonsd78 wrote: »

I know this question is probably impossible to answer, but can anybody give me a ballpark figure on what the tax bill would be at the end of each year. Am I talking a couple of grand? Five grand? Upwards of five grand

I appreciate that things are difficult for you, but we can't tell you - we don't know what your other income will be and we don't know how your costs are structured.

You need to work out the income, your expenses, your allowable expenses, your profit and from that, the tax due.

If it is a recent mortgage, with a large amount of the repayment in interest, then your expenses will be high and profits 'low'.

If it is a mortgage that is nearing its end, with a small amount of the repayment in interest, then your expenses will be low and profits 'high'.

As you may be working abroad, you will have to pay your income tax there, not here. Few people on boards.ie will know the ins-and-outs of allowable expenses in the UK.

athtrasna

You will need to talk to your bank, there is no blanket answer. Beware that banks generally only offer interest only for short periods, maybe a year, maybe two, but not long term. So it's only a short term solution, and with taxes and other charges it may not be worth your while renting your house.

The_Conductor

Interest only mortgages- have been phased out. A lending institution might give you an interest only period- as a stop-gap measure- because of your recent unemployment- but not to let your property.

Your rental income is not factored into your repayment capacity by a lender (normally)- they look at guaranteed sources of income- alongside liquid assets.

Rental income- is however, considered as means by DSP- so if you were entitled to a means based payment- it would be reduced according to whatever income rules were in place, by the rental income.

Rental income- is also income that has to be declared in full to the Revenue Commissioners- regardless of whether or not there is tax due on it.

Mortgage interest- is 75% allowable as a deductible expense from the gross rental income- before determination of taxable income- but all of this still has to be declared........

On top of all of this- as a previous poster has asked- if you're planning on letting out your property- where are you planning on living yourself? Its not that you can offset rental income against renting somewhere else- unfair though it might sound- its not allowable under Irish tax law.

All-in-all- unless you have a fundamental reason for letting the property- I'd suggest approaching your lender instead- advising them of your change in circumstances- and requesting a payment holiday and/or an interest only period- to get you through the difficult financial times you find yourself in- however, unless there was a compelling reason to do so- I would continue to live in the property- and not let it out (for a number of reasons- not least, you may have serious issues trying to get it back at a future point in time from overstaying tenants).

newacc2015

I wouldnt for the simple reason of MARP. If you fail behind on the mortgage for 1/2 months on rent property, certain banks will put in place rent receivers and repo it. Where as if you fall behind on your personal mortgage, repossession is a long and difficult process for the Bank. You can rent out rooms in your house to earn €12k a year tax free.

Personally I would get on MABS ASAP and look for an emergency appointment. DONT and I mean dont under any circumstances start to pay your mortgage with a credit card or overdraft. It will make things worse, but call MABS or any other financial advice groups for help with your situation. A majority of people dont have skills to deal with the banks

The_Conductor

LyonsD78 - I have merged your two threads together here- please use the one thread- it gets very messy if you start multiple threads on basically the same topic.

Thankyou.

The_Conductor