Does our Position Qualify for Taxable Rental Income?

Hi - this is my first post on Askaboutmoney.com so apologies if I'm asking something which has been answered many times already. I did browse the various threads first, but I'm still a bit confused as to whether our circumstance qualifies for taxable rental income, mainly becuase we won't be making any profit from renting out our house & there's a lot of talk about carrying losses forward to the following tax year.

Since we have outgrown our own 2up2down terrace house, we need to move into a larger rented accommodation, while then renting out our own house. My wife & I are both PAYE workers, paying at the higher rate. Selling the house is not really an option since we are in negative equity to the tune of about €50k.

It would be a great help if somebody could outline the basics about what we need to know in terms of our rental position, e.g.

1. Will the rent from our house be liable for tax (expected rent will be approx. €600pm & mortgage repayments are almost €950pm)?

1a. we currently get 30% mortgage interest relief deducted at source, if we are liable for taxable rental income can we then claim the remaining 70% as an allowable expense?

2. Other than registering with the PRTB, are there any other fees that we need to pay as landlords - I'm not sure if we need to pay NPPR since this is our only property? (also not including the obviosu property tax, USC, water charges, septic tank registration, utility bills, etc.)?

3. If we begin to rent out our house in March 2013, am I right in saying that we don't have to make a tax return on the rental income until Oct 2014?

Thanks in advance to anyone who is able to offer some input into my query.

It's bad news I'm afraid.

1. Yes the rent will be a taxable source of income

1a. You will lose your entitlement to mortgage tax relief at source if you move out of the house - you must be living in the house as your PPR to qualify for the relief. If you are getting 30% relief this could result in a hefty increase in your mortgage payment. You can't claim TRS and a deduction from rental income, so in your case you lose the original 30% you were getting, and you are then allowed to take 75% of the total mortgage interest (not the total mortgage repayment) as a deduction (i.e. an expense) from whatever rent you receive.

2. I'll leave that for the learned landlords here to comment on (that means you Oldnick!)

3. That's right

2. You would need to pay the NPPR charge for 2013 if you rent before the 'liability date' of 31st March 2013 - see https://www.nppr.ie/Faq.aspx#fk6
After this year, the NPPR will not exist.
Property tax, according to some recent articles I've seen should be a deductible expense.
I am assuming that water charges when they come in will be against the tenant rather than the landlord, as the landlord won't have any control over the use of water - maybe someone will correct me on that?
I haven't had any dealings with the septic tank charge so I'm not sure about this.
Utility bills would normally be transferred to the tenant from the electricity/gas readings when they move in.

If you post the interest only portion of your mortgage, I'm sure that someone can do the figures for you.

Nutso said:

2. You would need to pay the NPPR charge for 2013 if you rent before the 'liability date' of 31st March 2013 - see https://www.nppr.ie/Faq.aspx#fk6

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A liability to NPPR for 2013 will exist if, at 31/03/13,
(1) you own this property; and
(2) it is not your principal private residence at that date.

This applies regardless of whether or not you rent the property on or before that date.

Thanks for clarifying - I assumed that if the OP did not rent they would be living there but that's not necessarily the case.

Thanks to everyone who replied, the knowledge on this forum is incredible.

Our TRS for the mortgage interest relief equates to about 75pm as of the last tax certificate received from the Revenue in Dec 2012. I'll need to check the figures to see what the difference is in terms of calculating 70% of the total interest & deducting as an expense.

It's also good to know about the new NPPR ruling, we might consider waiting until April 1st to rent out our own house, in order to avoid this fee.

I'm sure I'll be back here asking more basic questions when it comes time to do a tax return in 2014! Until then I'll just keep all my receipts & wait for the next ridiculous budget changes to further cripple us in Dec 2013

It's also good to know about the new NPPR ruling, we might consider waiting until April 1st to rent out our own house, in order to avoid this fee.

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I would disagree. If you rent on Feb 1st you get circa 1200 rent. You get 1k extra. Even if you pay top rate tax it's 490.