Rental property-tax questions

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Sam

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My sister has her own house but is now planning on moving in with her boyfriend. She is going to rent out her place and went to the tax office to ask for some advice but they weren't very helpful.

Basically she wants to know are her mortgage repayments tax deductible.

So for example. Say that her mortgage repayments are 800 a month and she rents the property out for 900 a month. Does she have to pay tax on the entire 900 or just the difference (100)?

Also if she buys a new cooker and other household appliances can she claim tax relief on them?

Edit: My sister currently earns enough in her job so that she falls into the higher tax bracket. Does this mean that any tax paid on the rental income will be at the higher rate of tax (41%)?
 
No. She is liable to send in a form 12 every year to revenue. A quick rough sample would be

Rental income………….€10,800 (12 x 900)

Expenses
Mortgage interest………€ 5,000 (75% of the interest paid that year)
Decorating & repairs….€ 200 (plumbing, electric carried out for the year)
Management fee……….€ 900 (whatever she pays pa)

Taxable profit…………..€ 4,700

Tax at 41%……………..€ 1,927
PRSI at 4%……………..€ 188
USC at 7%..............€ 329

This is not exact but you get the gist. She may be only earning under the 41% threshold, she may have more expenses. She CAN'T claim original expenses prior to letting but she can claim a small percentage of wear and tear once its let out.
 
elcato said:
She CAN'T claim original expenses prior to letting but she can claim a small percentage of wear and tear once its let out.
Click to expand...

She can claim, on an annual basis for 8 years, 12.5% capital allowances on the value of furniture & fittings at the date of first letting, and on subsequent additions thereafter.
 
AlsJust to stress, in relation to the original question you asked abour mortgage repayments, it is 75% of the INTEREST that can be claimed as deduction from rental income - the mortgage repayment is (normally) made up of both capital and interest.

Also, if she is currently claiming TRS on her mortgage she will lose this when she no longer lives in the house; this will increase the amount of interest payable on the mortgage.
 
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