Buying second house

[Foxirl]

Hi

I bought a house back in 1999 for around 100,000 euro. I have no remaining mortgage left on this property. This year I have moved to the other side of Ireland and am considering buying a new property here.

If i buy the new property which is 80 sqm I believe I do not have to pay any stamp duty as its just built and will now become my principle residence. Am I correct in saying this.

I have rented out my existing property so if I decide to sell this in the future I belive I will have to pay CGT on the difference in Sale and Purchase Price for the amount of years it was rented for. As the House is now worth 260,000 it means I have a profit of 160,000. If I rent it out for 2 years that means it has been rented for 2 out of the ten years which means I will have to pay CGT on one fifth of the profit (33,000) Is this correct and if so it's not very fair as the profit was made when I was living in the house. I don't see it going up any more in the current climate.

My third question is if I remortgage my existing property for 220,000 to fund the new property can I claim interest relief on it and also can I offset the interest I pay on it against the rental income.

Thanks

 

[ClubMan]

If i buy the new property which is 80 sqm I believe I do not have to pay any stamp duty as its just built and will now become my principle residence. Am I correct in saying this.

Not quite. All owner occupiers (FTB or not) are exempy from SD on any new property under 125sqm. If the property is second and and costs more than €127K then you will have some SD liability. See here for some summary info.

I have rented out my existing property so if I decide to sell this in the future I belive I will have to pay CGT on the difference in Sale and Purchase Price for the amount of years it was rented for.

Yes - more or less. Get independent professional advice on your specific liability.

Is this correct and if so it's not very fair as the profit was made when I was living in the house. I don't see it going up any more in the current climate.

Them's the rules. If you don't like it then sell it now to avail of a CGT free capital gain.

My third question is if I remortgage my existing property for 220,000 to fund the new property can I claim interest relief on it

Yes.

and also can I offset the interest I pay on it against the rental income.

No.

 

[Foxirl]

Thanks for the replies Clubman.

In relation to your last answer 'No' can I ask why not.

If I have a mortgage on a house and I am renting it out I was nearly sure that i could subtract the Interest I was paying from the rent I was receiving to calultae my taxable income for the property. I know I can also subtract maintenance costs etc.

 

[ClubMan]

In relation to your last answer 'No' can I ask why not.

Because (a) there is no mortgage outstanding on the property that is being rented out so there is no interest to be offset against rental income and (b) the loan secured on that property is being used to purchase a new PPR and not to purchase/renovate the rented property. In any case you seem to be asking if you can claim owner occupier mortgage interest relief on a loan while also offsetting the interest against rental income and that is a definite no-no.

If I have a mortgage on a house and I am renting it out I was nearly sure that i could subtract the Interest I was paying from the rent I was receiving to calultae my taxable income for the property.

No - it doesn't matter that the loan is secured on the rental property, what matters is what the money is used for. In this case you are not using it to buy/renovate the rental property but to buy a new PPR. That is why you can claim owner occupier mortgage interest relief on it but not set the interest against rental income.

I know I can also subtract maintenance costs etc.

Yes - different matter though.

You should get independent, professional advice on the tax issues relating to the rental property since you don't seem to be sufficiently au fait with them and could end up making an incorrect decision (e.g. tax return) as a result.

 

[Foxirl]

Thanks Clubman.

I appreciate the response and it makes sense now. I also got some info off revenue.ie and it basically said what you just posted.

Thanks again

 

[ClubMan]

You should also get independent, professional advice.