Advice for new landlord

Firblog

Hi, I'm thinking of buying an apartment to rent it out.


I'm thinking of setting up as a company, so as to pay just corporation tax, and be able to claim the interest on the small loan I'll need against the income.


Would people recommend going about this in this way?


Also would appreciate any other advice given (even if it is 'don't do it')


Cheers

godtabh

Dont. Its not worth it.

draiochtanois

This post has been deleted.

antoinolachtnai

Advice is to get some tax advice. Putting the Asset in a limited company has implications. Separately you might need commercial advice. It is honestly hard to see much upside in owning a single apartment. But it depends on what you have in mind.

relax carry on

Firblog wrote: »

Hi, I'm thinking of buying an apartment to rent it out.


I'm thinking of setting up as a company, so as to pay just corporation tax, and be able to claim the interest on the small loan I'll need against the income.


Would people recommend going about this in this way?


Also would appreciate any other advice given (even if it is 'don't do it')


Cheers

25% CT Rrate for rental income. And how are you going to extract your cash from the company?

steamsey

I wish it were as easy as setting up a company to hold the asset and paying CT instead of 52% Income Tax, PRSI and USC

This is not practical / efficient for one property

Check out how the profits from the company will be taxed when you try to extract them

If anyone has gone and done this, I'd love to hear about it including if anyone has tried to sell the asset

Some info - https://www.maneelymccann.ie/factsheets/personal-tax/property-investment-tax-aspects

https://www.boards.ie/vbulletin/showthread.php?t=2057696956

davindub

steamsey wrote: »

I wish it were as easy as setting up a company to hold the asset and paying CT instead of 52% Income Tax, PRSI and USC

This is not practical / efficient for one property

Check out how the profits from the company will be taxed when you try to extract them

If anyone has gone and done this, I'd love to hear about it including if anyone has tried to sell the asset

Some info - https://www.maneelymccann.ie/factsheets/personal-tax/property-investment-tax-aspects

https://www.boards.ie/vbulletin/showthread.php?t=2057696956

I doubt anyone does this, its less tax efficient.

You pay 25% on more or less the same income, its the same deductions. There is a bit of a dispensation from revenue on interest for loans for assets for business use but it does not cover case5 assets.

You then must either distribute the income and pay income tax or pay a close company surcharge on the undistributed profits and income tax when you take the income.

A reit is more efficient but again you must distribute the majority of income, along with float the reit on the stock exchange within 2 years.

The smartest thing you can do with a mortgaged property is use the proceeds and whatever you can afford to clear off the mortgage as much as you can. Along with eventually clearing the finance, capturing the appreciation, you save the 5% interest on whatever additional funds you put in.

Firblog

Well I had been figuring that corporation tax was 12.5%. That the interest charged would be tax deductable. That I would just keep the income in the business and when I retire in the not very distant future I would begin to pay myself a wage every month.

Obviously faaaar to simple a plan :rolleyes:

As suggested will have to talk tax to someone with knowledge..

TSQ

Firblog wrote: »

Well I had been figuring that corporation tax was 12.5%. That the interest charged would be tax deductable. That I would just keep the income in the business and when I retire in the not very distant future I would begin to pay myself a wage every month.

Obviously faaaar to simple a plan :rolleyes:

As suggested will have to talk tax to someone with knowledge..

Also, unlike a private landlord, you can pay yourself for time spent on repairs (assuming you do them yourself) and admin, travel expenses, etc; depending on your age and the salary you pay yourself, you can put a substantial sum into your pension every year with no deductions (a private individual putting money into a pension fund gets a tax credit but still pays prsi and levy); you can pay yourself a salary and as an S1 taxpayer you only pay 5% total prsi (i.e. Employer + Employee); depending on how long you hold the company, you can sell the company (and the assets) on retirement and pay a reduced level of capital gains tax. So I wouldn't discount it, but you would need to plan on how you eventually extract the value of the house from the company in the end. And yes, speak to an accountant and a good independent pensions adviser first.

riclad

If you sold the apartment, bought a 2 or 3 bed house,
rent out one or 2 rooms, under the rent a room scheme .
The first 12k rental income is tax free .

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/index.aspx


quote ; from revenue.ie

Overview
If you let a room in your home, the income you receive may be exempt from tax.

The income you receive must not exceed the exemption limit. If it does then you are taxed on the total amount.

It can only be claimed by individual taxpayers.

end quote ,
eg rent a room, means you must be living in the house and renting
out 1 or more rooms .


My friend rents to a nurse ,
She is very busy,
the nurse leaves for work at 9am, comes home at 6pm.
She is very quiet.

I,m presuming you live in dublin or an urban area where rents are high.
As a landlord you can claim maintenance, agents fee,accountancy
fee, 75 per cent of loan interest against tax.

I doubt if it makes sense to set up a corporation just to
reduce the rent on One apartment,
but i,m not a tax expert.

4ensic15

Firblog wrote: »

Well I had been figuring that corporation tax was 12.5%. That the interest charged would be tax deductable. That I would just keep the income in the business and when I retire in the not very distant future I would begin to pay myself a wage every month.

Obviously faaaar to simple a plan :rolleyes:

As suggested will have to talk tax to someone with knowledge..

What about the taxes on undistributed earnings?

TSQ

4ensic15 wrote: »

What about the taxes on undistributed earnings?

For a small business (single property) you are better off to distribute all the income, otherwise you end up paying tax twice, corporation tax and, eventually, income tax when you withdraw the accumulated profits. Since the o.p. is thinking about his/her pension, put as much as possible into company pension plan, whereby you benefit from 100% of the cash invested, and take the hit on paying the higher rate tax on whatever salary you pay yourself.