Dublin City Council disgrace again

AlmightyCushion

Deleted User wrote: »

Agreed, I'm not downplaying purchasing property as an investment....in fact it's number one compared to deposit interest rates etc. at the moment. I'm just talking purely in terms of paying tax.

In the first example above, you are receiving €1,600 in rent, paying it all out on the mortgage, then you're hit with a bill for €7k at the end of the year (minus deductibles).

In case anyone is interested, that 250k loan @ 4.5% over 20 years amounts to a total repayment of 380k, or €130,000 in interest alone.

It's a long term investment. After the 20 years, you have still gotten that 250k asset (which will probably be worth a good bit more by then) for significantly less than 250k thanks to the rental income. After that 20 years your costs will drop as you will no longer have a mortgage or interest to pay on it.

blanch152

Deleted User wrote: »

Agreed, I'm not downplaying purchasing property as an investment....in fact it's number one compared to deposit interest rates etc. at the moment. I'm just talking purely in terms of paying tax.

In the first example above, you are receiving €1,600 in rent, paying it all out on the mortgage, then you're hit with a bill for €7k at the end of the year (minus deductibles).

In case anyone is interested, that 250k loan @ 4.5% over 20 years amounts to a total repayment of 380k, or €130,000 in interest alone.

Was it not a tax bill of €4,800 at the end of the year?

If you are renting it for €2,000 per month, your net outlay after tax per month is €200 according to your figures.

That amounts to an outlay of €48,000 over 20 years. If there are further rent increases, the net outlay may decrease even further. If you had managed to secure an average rent of around €2,400 over the 20 years, then the outlay is €0 for an asset of €250,000.

odyssey06

We seem to have spiraled into a wider discussion on property and taxation.

I return to the point that LPT is supposed to fund local services - and in fact that is what the revenue generated is used for, albeit with potentially 20% redirected to fund such services elsewhere in the country.
It is up to Dublin City Council to set the rates in order to fund their local services.

It is not meant as a lever to be used by local councils to change property patterns re: ownership, rental, investment.
Nor, do I think the current setup of the tax in terms of rates, market valuations & +/- 15% ranges would make for an effective lever of such change.

@ AC:
Yes, I'm well aware of that, as already stated. It doesn't alter the fact that your tax liabilities increase. When you no longer have €900 to write off against that rental income, those liabilities increase even further.

@ blanch:
apologies, I got mixed up with the two. It is indeed €4,800 for the lower rental amount.

AlmightyCushion

Deleted User wrote: »

Yes, I'm well aware of that, as already stated. It doesn't alter the fact that your tax liabilities increase. When you no longer have €900 to write off against that rental income, those liabilities increase even further.

The reason your tax liabilities are increasing are because you either have more income or you have less expenses. Both are good. If I get a pay rise tomorrow, I will pay more taxes.

At the beginning of the mortgage you have to pay €1600 a month for the mortgage but get to write off €900 interest payments a month. Once the mortgage ends you don't get to write off that €900 because you no longer are paying any interest. It also means you aren't paying €1600 a month for the mortgage. Your tax liability has increased but you are much, much better off.

blanch152

odyssey06 wrote: »

We seem to have spiraled into a wider discussion on property and taxation.

I return to the point that LPT is supposed to fund local services - and in fact that is what the revenue generated is used for, albeit with potentially 20% redirected to fund such services elsewhere in the country.
It is up to Dublin City Council to set the rates in order to fund their local services.

It is not meant as a lever to be used by local councils to change property patterns re: ownership, rental, investment.
Nor, do I think the current setup of the tax in terms of rates, market valuations & +/- 15% ranges would make for an effective lever of such change.

No, it is not meant to be used by local councils to change property patterns. However, if Dublin city Council reduce the rate because they don't believe they need the income for services, why can't they keep it at the higher rate and build houses with the surplus, as so many believe they can easily do?

NinjaTruncs

Spanish Eyes wrote: »

A good chunk of Dublin’s LPT is re distributed to low yielding counties. So I’m happy with the reduction.

Thank you.

weldoninhio wrote: »

Doesn't quite a big % of the LPT get removed from Dublin and spent elsewhere.

Geuze wrote: »

20% of all LPT from every council is put into a fund, to be distributed to weaker councils.

This is known as fiscal equalisation, and happens in most countries.

Geuze wrote: »

20% of every counties LPT is put aside into a fund for redistribution to weaker councils,

While every country pays 20% towards the equalisation fund, only 21 out of 31 councils get benefit from, 19 of the 21 councils that pull from the fund take more than they contribute, and the two that don't draw more only have a net contribution of circa €100K - €300K .

Donegal for example pay ~€2M into the fund but draw ~€16M from it. Donegal also has the lowest collection rate in the country and one of the highest rates of low valued properties, 51.1% of properties valued less than €100,000.

Think of it this way 60% of property owners in DLR pay more towards Donegal's council running cost than 50% of Donegal people do.

sources :https://www.revenue.ie/en/corporate/documents/statistics/lpt/local-property-tax-2018.pdf

https://www.housing.gov.ie/sites/default/files/publications/files/2018_lpt_final_allocations_to_local_authorities_post_variation.pdf

odyssey06

blanch152 wrote: »

No, it is not meant to be used by local councils to change property patterns. However, if Dublin city Council reduce the rate because they don't believe they need the income for services, why can't they keep it at the higher rate and build houses with the surplus, as so many believe they can easily do?

Dublin City Council already has the highest spend per person on housing in the state and LPT accounts for only 8% of its revenue... I don't think it's going to be a solution to that either. Requires central government to step up as I think this it too big for any one council, or councils together, to solve.
https://www.rte.ie/brainstorm/2019/0514/1049446-what-does-your-local-council-do-with-your-money/

When 20% of LPT is being siphoned off elsewhere, DCC would have even less of that 'surplus' to use.

Idbatterim

the morons in DCC are offensive. There is an issue here with housing and there is an issue here with money i.e. we need a lot more of it for many areas! what do these morons do? block development as much as possible, massively restrict density. Say you increase a building size by 50%, imagine the extra amount that goes to the exchequer from the construction alone and the extra that goes to LPT during the lifetime of that development! along with a host of other benefits.

Trying to block the cash cow tourists from coming here now too, by limiting hotel development! Thats what you get with nothing but the lowest common demonstrator morons running for office here at every level!

Idbatterim

the morons in DCC are offensive. There is an issue here with housing and there is an issue here with money i.e. we need a lot more of it for many areas! what do these morons do? block development as much as possible, massively restrict density. Say you increase a building size by 50%, imagine the extra amount that goes to the exchequer from the construction alone and the extra that goes to LPT during the lifetime of that development! along with a host of other benefits.

Trying to block the cash cow tourists from coming here now too, by limiting hotel development! Thats what you get with nothing but the lowest common demonstrator morons running for office here at every level!

oh another point! There are comments saying "being in an expensive property, doesnt autmatically mean you are in a position to comfortably pay LPT" Oh yeah? and paying a marginal tax rate of 50%! 50% ! over the pittance of E35,000 makes you the wolf of wall street ability to pay does it?

Geuze

blanch152 wrote: »

Buying a house was the most tax-efficient thing I ever did. Being in the public service at the time I couldn't get tax relief from pension contributions,n.

All workers get tax relief on pension conts, incl public servants.

blanch152

Geuze wrote: »

All workers get tax relief on pension conts, incl public servants.

Yes, but if you are a public servant, likely to get 40 years, not much value (or tax relief) in extra pension contributions.