tax you pay on house to rent out

thebourke

if you have a house to rent out (for example 1000euro per month)..roughly how much would you be paying in tax etc
Not mortgage on the property.

howardmarks

thebourke wrote: »

if you have a house to rent out (for example 1000euro per month)..roughly how much would you be paying in tax etc
Not mortgage on the property.

€500

Drewgerger

Net rental income is added to your other income. The tax rate you pay depends on your total income and personal circumstances.The rate at which you are taxed on rental income depends upon your tax rate band. The standard tax rate is 20% on earnings up to the standard cut-off rate; any income you collect after this cut-off point is taxed at 40%.You will also be required to pay PRSI and USC.Irish Tax Residents are liable for PRSI of 4% on their rental income profit.The rates of USC are from 2% to 10% – it depends on what other income you have Allowable expenses include:

– Management fees
– Utilities, refuse and other service charges
– RTB registration fees
– Insurance premiums
– Advertising expenses
– Maintenance costs
– Wear and tear.

You will be asked to provide proof for each deduction you claim on your return, so be very careful to save all documentation related to any expenses associated with your rental

All landlords are required to register a new tenancy within one month of the tenancy’s start date. The fee is €90 per tenancy;

LawBoy2018

Drewgerger wrote: »

Net rental income is added to your other income. The tax rate you pay depends on your total income and personal circumstances.The rate at which you are taxed on rental income depends upon your tax rate band. The standard tax rate is 20% on earnings up to the standard cut-off rate; any income you collect after this cut-off point is taxed at 40%.You will also be required to pay PRSI and USC.Irish Tax Residents are liable for PRSI of 4% on their rental income profit.The rates of USC are from 2% to 10% – it depends on what other income you have Allowable expenses include:

– Management fees
– Utilities, refuse and other service charges
– RTB registration fees
– Insurance premiums
– Advertising expenses
– Maintenance costs
– Wear and tear.

You will be asked to provide proof for each deduction you claim on your return, so be very careful to save all documentation related to any expenses associated with your rental

All landlords are required to register a new tenancy within one month of the tenancy’s start date. The fee is €90 per tenancy;

Would it be possible for him to instead set up a company and a business bank account + transfer the property from his name to said company?

davindub

LawBoy2018 wrote: »

Would it be possible for him to instead set up a company and a business bank account + transfer the property from his name to said company?

It is possible but not advisable.

LawBoy2018

davindub wrote: »

It is possible but not advisable.

Why not? CGT? Surely it would be far more tax efficient in the long run.

davindub

LawBoy2018 wrote: »

Why not? CGT? Surely it would be far more tax efficient in the long run.

There would be many variables but the gist of it is:

The company pays 25% CT, close company surcharge on undistributed profits and then the owner pays IT on Salary/ dividends.

You can use directors loan account to pay off the house but at the end of the venture, after paying cgt on the gain from selling, you pay IT on the cash extracted.

Then you have added costs of preparing financial statements.

For most landlords this model is not beneficial.

Will Yam

LawBoy2018 wrote: »

Why not? CGT? Surely it would be far more tax efficient in the long run.

No.

Let’s say there is a net taxable income from the house of 10,000.

As an individual you pay tax at your marginal rate - either 20% or 40%, prsi at 4$, and USC depending on what your income level is, but probably 4.5% if you have other income.

So 40+4+4.5 = 48.5% of 10000 is 4850 leaving 5250 in your Poca.

As a company, you pay 25% of 10000 - 2500 leaving 7500 in the company.

So when you withdraw the 7500 from the company you pay 48.5% - 3637.50 - leaving 3862.50 in your poca.

Out of which you have to pay the costs of setting up a company and comping with all regulatory and reporting requirements.

No contest.

LawBoy2018

Very informative! Thanks guys.

thebourke

and how would it work if you had a mortgage on the property instead of having no mortgage

Geuze

thebourke wrote: »

and how would it work if you had a mortgage on the property instead of having no mortgage

The mortgage interest is deducted from the gross rental income, along with other deductions, to arrive at the net rental profits.

Bawa

thebourke wrote: »

if you have a house to rent out (for example 1000euro per month)..roughly how much would you be paying in tax etc
Not mortgage on the property.

In the US you might be able to get away without paying any tax for many years because of depreciation.

Kewreeuss

So if you are working and have a 'spare' house, it's not really worth your while renting it out?
You'd need a few houses and not be working?

Will Yam

Kewreeuss wrote: »

So if you are working and have a 'spare' house, it's not really worth your while renting it out?
You'd need a few houses and not be working?

It depends how much rent you get. And what expenses you have, particularly interest expenses.