Tax on Rental Income?

G

Gatekeeper

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Hi All,

I would be very grateful for any advice anyone could give me re the possible purchase of a rental property with no mortgage and the tax that would be payable re same.

My husband's net PAYE income is 29,172 per annum.

My net income is a disablement pension net 12,053 per annum.

Income from rental property would be 12,000 approx per annum with no mortgage interest relief as there would be no mortgage on the property.

We do not have a mortgage on our Principle residence so just have ordinary personal and PAYE tax credits.

I am wondering if I am entitled to a PAYE tax credit or not? And if we would be tax assessed as one spouse with income or two spouses with income?

Really I am just wondering if it would be worth purchasing a second property and what the tax consideration would be. Unfortunately unable to sell our principle private residence at the moment so if we wish to purchase a property in the area we wish to live in this is the situation we find ourselves in.

Hope I have given enough information. Any advice would be much appreciated. My husband did not receive a tax credit certificate for 2012 so am not sure how to calculate tax if we were to purchase a second property.
 
Rental income is taxed under schedule D Case V, given the figures outlined above if the property is purchased in joint names then the income after expenses insurance repairs PRTB (NPPR, and Household tax are not deductible) will be subject to 20% income Tax, USC of 7% and from 1.1.13 PRSI of 4%.
 
Many thanks Joe 90 for your helpful response. I was confused as on my husband's tax credit cert for Jan 2010 to Dec 2010 details as follows:

Personal Tax Credit 3,660
PAYE Tax Credit 3,660
Flat Rate Exps 12.80
Service Charges 70.00

So total tax credits 7,402.80

Tax credits reduced by
DSFA Pension 2,264.00

Net Tax Credits 5,138.80

Tax Rate Bands

Rate Band 1 56,723.00

This rate is increased by
flat rate exps 64.00

This rate band is reduced by
DSFA pension 11,323.00

The amount of your income taxable at 20% 45,464.00

All income over 45,464.00 euro is taxed at 41%


Therefore I had assumed based on these figures that although tax credits and rate bands for 2012 are slightly different that some of the income would be taxed at the rate of 41% if we did purchase a property with rental income.

I was working on the presumption as follows:

Personal Tax credits for 2012 3300
PAYE Tax credits 3300
Flat rate exps 12.80
Service charges 70.00

Total tax credits 6,682.80

Working on the following figures

My husband's gross income approx 30,000p.a. 2012
DFSA pension me gross 12,054p.a.
Rental income(before allow deds) 12,000p.a.

So total income for 2012 54,054 gross
Less tax credits 6,682.80

Giving taxable income of 47,371.20 x 20% So if property were to be purchased in joint names I have worked out tax liability as follows approx:

Taxable income of 47,371.20 x 20% = 9474.24 income tax
USC 2% on 10,036 @ 2% = 200.72
income from 10,036.01 to 16,016 x 4%=
5,979.99 x 4% = 230.20
Income above 16,016 x7% =
31,355.21 x 7% = 2,194.86

P.R.S.I. approx 47,371.20 x 4%
if P.R.S.I. was payable on all income
including rental income 1,894.85

This would equal a total income tax
liability of 13,994.87euro

Obvisously if some of this income should be taxed at a rate of 41% more income tax is due. This is what I have not sure about.


Or if just working out taxable income if property purchased in joint names I have worked out income payable on rental property as follows:

Rental income (less allowable deductions) 12,000 approx

Income tax of 12,000 @ 20% = 2,400
USC OF 7% OF 12,000 = 840
From 1.1.13 P.R.S.I. @ 4%= 480

So total income tax liability of Total 3,720 due on rented property

So, Income from rented property 12,000
Less tax liability of 3,720

Gives a net income after tax of 8,280 euro on rented property
p.a.

Sorry for the long drawn out response. Would very much appreciate Joe 90 if you could let me know if these figures are correct. Thank you again for all your help.
 
There's little point in anyone working out each figure . The only thing to consider are your last few lines based on the only logical course of action which is to do everything jointly.

So, yes, on the joint income ,joint ownershiop etc basis your figures are right except you must also deduct
- annually NPPR, property charge,
- each new rental-PRTB,
- before first rental- obtaining BER cert
- insurance
- you may want to consider tenants not paying, leaving the place in a mess or just being plain difficult and bothersome.

Nobody can tell you what the above costs will be as some will change after the Budget, certainly the property charge.
I'm going to guess about €1.000 should be dedcuted from your estimate.

You don't state cost of house and fitting it out.
Based on your gross rental estimates you should consider that you may net about € 7k p.a. and then compare that with the net that you will receive from the best deposit account - see the AAM sites for that.

At present it is unlikely that the nett returns on renting a house (as opposed to an apartment) beat the best deposit rates. And it's far easier to leave money in a good deposit account than renting a house.

(I have not considered any possible capital appreciation.)
 
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Many thanks Old Nick I will take on board all that you have said before making a decision. House would cost 250,000 euro approx and would come fully furnished. There have been tenants in it for the last one and a half years and they wish to stay on in the house. It is fully furnished.
 
Hi Green Grass,

Am not in negative equity in PPR. Just have not been able to sell it. Why do you ask?
 
Gatekeeper said:
Hi Green Grass,
Am not in negative equity in PPR. Just have not been able to sell it. Why do you ask?
Click to expand...

"possible purchase of a rental property with no mortgage" and "Really I am just wondering if it would be worth purchasing a second property and what the tax consideration would be" in your post is what made me ask this question.
do you still have a mortgage on your ppr?
 
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