Tax on rent in excess of the Rent-a-room allowance

B

bronco

Guest
Hello all
I recently used a traditional home mortgage as well as a Buy-to-let mortgage to finance a house purchase. The split between the 2 mortgages is roughly 50/50. I am now living in the house and renting out 3 bedrooms in a normal house-share type arrangement. I expect my rental income for the year to be about €14,000. I know that I’m entitled to €7630 tax free from the rent-a-room scheme but do I then have to pay full tax on the rest?
My other expenses from the house (buy-to-let mortgage interest, insurance, bin charges etc) are probably around €7000 too.
Does anyone know if there’s a clever way of combining the two figures to minimise my tax liability or do I have to just use the higher figure and pay tax on the rest? Would I be better switching the whole mortgage to buy-to-let so I can write off all the interest payments against my rent?
The rental guide from the revenue isn’t too clear on this subject.
Thanks alot for any advice.......
 
I’m entitled to €7630 tax free from the rent-a-room scheme but do I then have to pay full tax on the rest?
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Not correct - If your entire rental income exceeds €7630, then the entire amount is taxable income.

If you live in the property, you get tax relief at source subject to the current cap. If you don't live there, you get mortgage interest relief on your rental income with no cap.
 
Thanks rainyday. Thats not the news I was hoping to hear but what can you do! Sorry about the duplications but I just wasn't sure which forum was most suitable.
Can you tell me if I understand your comment correctly.
You're saying
1. If I live in the house I should be claiming mortgage interest relief from source for both mortgages and paying full tax on my rental income if it exceeds 7630

2. If I chose not to live there I can treat my buy-to-let interest as an expense in determining my rental profit. It would therefore be in my interest to change my home mortgage to buy-to-let in this instance, wouldn't it?

There's a section in the new revenue rental guide about part letting your property. i.e. if rental income exceeds 7630 I could write off 75% of my expenses if I occupy only 1 of the 4 bedrooms. Have you any comments or experience of this?
Thanks again for your advice.
 
To be honest, I'm not a expert on these things, so I can't really answer your further questions.
 
Fair enough. I know its a bit of a tricky area.
If anyone has any experience/knowledge of this it would me much appreciated.
Thanks
 
rent a room has nothing to do with your situation.
by living in the house and pulling in 14k rent, you are exposing yourself to income tax, prsi and cgt if and when you decide to sell. in the long run, you could be worse off than if you were only getting the 7-ish that RaR allows. as rainyday said,you need proper advice.
 
It sounds a bit over the top to say that it has nothing to do with my situation but I appreciate where you're coming from. It seems that we have adopted our Rent a Room scheme from the UK but according to their guidance its quite acceptable to pay full tax on everything over the threshold i.e. full tax on Rent less €7620 RaR allowance once its my ppr. Obviously not a great help to me here but I'm getting in touch with Revenue for further clarification.
That aside, it looks like I'm going to need proper professional advice from a financial/tax consultant/adviser who's really on the ball in this area. Any recommendations on who to talk to?
 
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