calculating tax on rental income

A

ash1990

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So I'm thinking of investing in a new home, hoping to get it for 120,000 having 60,000 myself I will be taking out a 60,000 15 year mortage.

Quick quote mortage is averaged at 440 monthly repay 4% apr

So repay per year at 440 would = €5280

That over 15 years would be = €79200

That would mean in total I am paying €19,200 in interest.

Now I know I can get 15% of my interest deducted from my tax on rental income.

My question is how do I calculate this? Do I just get 15% of €19,200 and divide by 15 and deduct this each year for the 15 years?

Or how do I calculate it for my tax bill each year, I want to be sure before purchasing that it is worth my while so want to get my deductions in rental income tax right
 
It's 75% of the interest per year.

Interest is higher early on when the outstanding capital is high and falls over time.

Every year you'll get a statement of the interest for that year - Just disallow 25%.
 
As an additional question, as only 75% of mortgage interest is an allowable write-off on tax on rental returns...If outstanding mortgage <€100K @ 3.70% over 19 years and mortgage will be fully repaid within the next 18 months. €10K is currently sitting in a rainy-day current account (earning approx 0.1%). Rental income is taxed @ 55%. An accountant advised to keep mortgage repayments as high as possible to reduce rental tax liability.. advice from AAM posters is always appreciated (btw, not I'm not interested in stocks/ horses/ fast partners - although I am tempted by longer term state savings). Thanks in advance.
 
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I am planning to use savings to pay back my mortgage. But tax @ 55% is paid on rental income (minus deductions + accountancy fees + property tax).
Q. Is paying back on mortgage asap the best option?

Savings on deposit interest is 1% at best (except for tax/prsi/usc-free state savings that are tied up for 4 years).
Apologies for asking, but I'm not familiar with this. Thanks in advance for replies!
 
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Logo said:
An accountant advised to keep mortgage repayments as high as possible to reduce rental tax liability..
Click to expand...

I wonder if you misunderstood the accountant - only the interest on the mortgage is deductible for tax so repaying it faster would actually increase tax liability.
 
Mrs Vimes said:
I wonder if you misunderstood the accountant - only the interest on the mortgage is deductible for tax so repaying it faster would actually increase tax liability.
Click to expand...
Thanks for the reply Mrs Vimes. I think the accountant said that 75% of the interest is deductible for tax. Accountant definitely advised to maximise mortgage... just wondering why others in similar position are share-dealing instead of re-paying mortgages?
 
Hi Logo,

your accountant said to maximise the mortgage, not the mortgage payment, because you are then paying higher interest and reducing your tax bill (by about 35% of the interest). This makes sense in as far as you are going to have borrowings anyway - ie if you have a home mortgage you may be getting no tax relief on it so pay off that before your investment mortgage.

If you pay €1000 in mortgage interest on an investment property you are reducing your tax bill by 1000x.75x.55=€412.50 but it is still costing you €587.50.
 
Not wild. Just ask Bertie Ahern for advice.... Minister of finance and accountant without a bank account?
 
honestly not interested in former Taoiseach / Minster of affairs. Just wondering how to maximise tax benefits
 
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Logo,

Could you clarify whether you also have a mortgage on your principal private residence?
 
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