Tax on rental income

Brego888

Sorry for hijacking a thread but didn't think my question required a new one.
How much tax is paid on rental income?

athtrasna

Brego888 wrote: »

Sorry for hijacking a thread but didn't think my question required a new one.
How much tax is paid on rental income?

It actually does require a new thread, you posted on a PRTB registration thread.

Tax varies according to a landlord's other incomes and deductible expenses but it can be in the region of 50%.

Gumbo

Brego888 wrote: »

Sorry for hijacking a thread but didn't think my question required a new one.
How much tax is paid on rental income?

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

Moonbeam

It depends on how much interest you pay on your mortgage too.
http://www.irishlandlord.com/index.aspx?page=calculators_taxestimation is a good tool.

Renting out a house from a tax prospective is stupidly expensive.

Gumbo

Moonbeam wrote: »

It depends on how much interest you pay on your mortgage too.
http://www.irishlandlord.com/index.aspx?page=calculators_taxestimation is a good tool.

Renting out a house from a tax prospective is stupidly expensive.

That calculator hasn't worked for me in a long time!

filbert the fox

Brego888 wrote: »

Sorry for hijacking a thread but didn't think my question required a new one.
How much tax is paid on rental income?

50% odd - less some deductables. A very expensive business.

Henry Ford III

It's adjusted for any allowable expenses and deductions and then taxed at your marginal rate.

If you have a decent income already it could easily put you into the high tax bracket.

aido12345

So hypothetically for a friend of a friend I've put the following into that calculator and come up with the below, is my estimation of the Mortgage Interest on the mortgage correct? I got it from here: mortgages dot ie forwardslash go forwardslash first_time_buyers forwardslash tax_relief_calculator (Sorry won't allow me to post a link)

Annual Rental Income: €16800 (€1,400 /month)
Mortgage Interest: €11,584.94 *
Insurance: €400
Mortgage Protection: €400
Legal fees for drawing up leases: €100
PRTB Registration Fee: €100
Repairs and Maintenance*: €500

*Mortgage of 300,000.00 for 34 years @3.65% = €1,284.56/month
where €10,693.79 is interest and €4,721 is off the capital at year 1


Total Expenses: €13084.94
Net Rental Income: (after expenses but before capital allowances) €3715.06

Taxable Rental Income: €3715.06
Estimated Income Tax & Levies (assuming a 41% tax rate + 5% PRSI & levies)**: €1708.92

athtrasna

That looks to me like you're trying to write off 100% of mortgage interest. Only 75% is deductible. You would also be liable for LPT

Gumbo

aido12345 wrote: »

So hypothetically for a friend of a friend I've put the following into that calculator and come up with the below, is my estimation of the Mortgage Interest on the mortgage correct? I got it from here: mortgages dot ie forwardslash go forwardslash first_time_buyers forwardslash tax_relief_calculator (Sorry won't allow me to post a link)

Annual Rental Income: €16800 (€1,400 /month)
Mortgage Interest: €11,584.94 *
Insurance: €400
Mortgage Protection: €400
Legal fees for drawing up leases: €100
PRTB Registration Fee: €100
Repairs and Maintenance*: €500

*Mortgage of 300,000.00 for 34 years @3.65% = €1,284.56/month
where €10,693.79 is interest and €4,721 is off the capital at year 1


Total Expenses: €13084.94
Net Rental Income: (after expenses but before capital allowances) €3715.06

Taxable Rental Income: €3715.06
Estimated Income Tax & Levies (assuming a 41% tax rate + 5% PRSI & levies)**: €1708.92

Have you got tax credits?
Are you PAYE or is the rental income your sole income?

aido12345

Thanks for the reply Ahtrasna, much appreciated. So 75% of €11,584.94 is deductible, so putting €8688.70 into the calculator it comes out at:

Total Expenses:: €10188.7
Net Rental Income: (after expenses but before capital allowances) 6611.3 €

Taxable Rental Income: €6611.3
Estimated Income Tax & Levies (assuming a 41% tax rate + 5% PRSI & levies)**: €3041.198

I just made up most of the figures and didn't include LPT or Accountant fees.

aido12345

The friend of a friend is PAYE alright, probably on the higher tax bracket so I think that was the default in the calculator.

Pkiernan

aido12345 wrote: »

Thanks for the reply Ahtrasna, much appreciated. So 75% of €11,584.94 is deductible, so putting €8688.70 into the calculator it comes out at:

Total Expenses:: €10188.7
Net Rental Income: (after expenses but before capital allowances) 6611.3 €

Taxable Rental Income: €6611.3
Estimated Income Tax & Levies (assuming a 41% tax rate + 5% PRSI & levies)**: €3041.198

I just made up most of the figures and didn't include LPT or Accountant fees.

You forgot USC .

cocoman

aido12345 wrote: »

Thanks for the reply Ahtrasna, much appreciated. So 75% of €11,584.94 is deductible, so putting €8688.70 into the calculator it comes out at:

Total Expenses:: €10188.7
Net Rental Income: (after expenses but before capital allowances) 6611.3 €

Taxable Rental Income: €6611.3
Estimated Income Tax & Levies (assuming a 41% tax rate + 5% PRSI & levies)**: €3041.198

I just made up most of the figures and didn't include LPT or Accountant fees.

Looks about right.
USC to be included aswell but you might have that covered under levies.

aido12345

He'll be quiet happy with that, although he's a few years in to the mortgage so I guess the mortgage interest will be a small bit less. He thought (as did I until I saw this thread) that it was rent taken in minus expenses added to your salary and then taxed at the various rates.
Thanks folks.

Gumbo

He needs to add it to his paye salary and work out his total tax liability and then pay from there. Don't forget to deduct med1 form expenses also and any other that he is entitled to.

Citizenpain

Also he needs to be registered with prtb to get interest deducted

riclad

You may as well register with the prtb before you send in the tax return,
otherwise you lose all tax credits on your interest payments .
maybe pay an accountant to submit the tax returns ,claim his fee as an expense .

Earleybird

Best advice would be to contact an accountant, you should be able to get a good one for about €250 for the return, 50% of which you'll be writing off in your return anyway. While the calculation itself isn't overly complicated (and I prepared mine until a couple of years ago when I decided to get a second opinion), each year my accountant has highlighted something that more than covered his cost so let that be your next step.

filbert the fox

Earleybird wrote: »

Best advice would be to contact an accountant, you should be able to get a good one for about €250 for the return, 50% of which you'll be writing off in your return anyway. While the calculation itself isn't overly complicated (and I prepared mine until a couple of years ago when I decided to get a second opinion), each year my accountant has highlighted something that more than covered his cost so let that be your next step.

I'm interested in what exactly your accountant can dig up that you didn't.

This stuff isn't rocket science
You know how much rent you got
you have all your receipts
you know how to divide by 4 and multiply by 3 for interest allowable
you know the Prtb fee and which year you paid.

The good folk at the Revenue will calculate your liability - even offered to do it this year in September!

Earleybird

filbert the fox wrote: »

I'm interested in what exactly your accountant can dig up that you didn't.

This stuff isn't rocket science
You know how much rent you got
you have all your receipts
you know how to divide by 4 and multiply by 3 for interest allowable
you know the Prtb fee and which year you paid.

The good folk at the Revenue will calculate your liability - even offered to do it this year in September!

The fact that you would even make such a comment disqualifies you from talking any further on the matter filbert. If you think the above 5 points is the exhaustive list of all that is required to complete a return then I'd go straight out on the street and start rounding up your clients

filbert the fox

Earleybird wrote: »

The fact that you would even make such a comment disqualifies you from talking any further on the matter filbert. If you think the above 5 points is the exhaustive list of all that is required to complete a return then I'd go straight out on the street and start rounding up your clients

If you think there's more to it I'd be interested.
Before you reply perhaps you are forgetting that receipts include of course:

Insurance,
Repairs,
Capital Expenditure,
Expenses



I simply asked how your accountant did it?

I'll leave it to the moderators to decide my fate thank you very much.

sunnysoutheast

Earleybird wrote: »

Best advice would be to contact an accountant, you should be able to get a good one for about €250 for the return, 50% of which you'll be writing off in your return anyway. While the calculation itself isn't overly complicated (and I prepared mine until a couple of years ago when I decided to get a second opinion), each year my accountant has highlighted something that more than covered his cost so let that be your next step.

Did your accountant identify specific tax-saving opportunities from your rental income alone or for your tax affairs more generally?

Earleybird

sunnysoutheast wrote: »

Did your accountant identify specific tax-saving opportunities from your rental income alone or for your tax affairs more generally?

He identified tax-saving related to capital allowances. [Enter Filbert to tell us how simple it is to divide that by 8]

Most accountants will ask questions which could lead to an overall reduction in your liability. Revenue, while very kind to calculate the liability will not probe expenses which could have been used to reduce your liability. The only point I was trying to make was that for little cost something may be identified which would cover the cost of the accountant, and its always good to have peace of mind knowing a qualified professional has prepared the return no matter how great you think your own workings are.

Gumbo

Similar question.
If I order broadband for my tenant and I pay the bill, this is fully tax deductible yeah?

Earleybird

kceire wrote: »

Similar question.
If I order broadband for my tenant and I pay the bill, this is fully tax deductible yeah?

Yes, fully deductable.