If I make a loss on my rental income, do I have to pay tax?

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mrso'brien

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Hi,

I am thinking of renting out a house I bought but the rental income that I get won't cover the mortgage.

Will I still have to pay tax on this property (apart from the 200 Euro property tax)?

The rent will be about 500Euro short of the mortgage each month.

Thanks
 
You can only offset 70% of the interest portion of your mortgage payment, so quite possibly you will have to pay some tax.
 
I'm sorry but I don't understand what you mean by 'interest portion'. I really am quite clueless about this!

My mortgage is 1800 per month and the rent I will get is 1500 Euro per month...can someone explain simply to me how to calculate what I will owe, if I owe anything?

Also, how do I tell Revenue I will be renting the house? Is there a specific form to fill in?

Thanks
 
You don't calculate if you make a rental profit or loss based on your mortgage payment.

You calculate it based on the interest part of your mortgage payment.

E.g.

Rent 1500
Mortgage 1800
Mortgage Interest 1400.
Mortgage Interest x 75% = 1050.
Mortgage Principal 400.

Rental Profit: 450.

You would actually be making a profit of 450 a month for tax purposes, you can also deduct other expense in order to decrease your tax bill.

Peadar
 
Normal mortgage payments are split into an amount that goes against capital and an amount that goes in interest. For example, if the mortgage is new and your repayments are 1800 a month, the interest portion could be 1200 and the capital repayment portion 600. Your mortgage provider will give you a statement at the end of the year showing what portion of your repayments is interest and what is capital. If your mortgage is with NIB (not sure if the other banks do this), you can also access this online on a month-to-month basis.

All rental income is judged to be "income" as normal and you are taxed on this. You can, however, deduct expenses against rental income before you apply your normal tax rate. One of those allowable expenses is 75% of the interest portion of your mortgage. So, taking the example above, if your rental is 1200pm and the interest portion of your (1800pm) mortgage repayment is 1000pm, you can deduct 750 of that (75%) from your rental income and pay tax on the difference (1200-750=450pm). So, you pay tax on 450pm.

There are other expenses that can be deducted from rental income, such as your PTRB fee, insurance, repairs etc.

You need to stop your Tax Relief at Source on the property (by informing Revenue) and you need to register with the PTRB before you rent the property. You need a BER cert prior to first rental. Keep all your receipts.

I think you need to have a chat with an accountant to get information on this. As you say, you're not well up on what needs to be done and there's only so much information that an internet message board can give you.
 
Peadar said:
You would actually be making a profit of 450 a month for tax purposes, you can also deduct other expense in order to decrease your tax bill.
Click to expand...
The other expenses include:-

- registration fee with PRTB - mandatory
- building and contents insurance
- landlord's liability insurance
- Repairs and maintenance (must have receipts cannot make a deduction for work you do yourself)
- wear and tear to furnishings and fittings @ 12.5% per annum
- sundry expenses (stationery, printing, photocopying, rent book, postage, etc.)

There's a good lease agreement [broken link removed], which you can download and adapt to your own needs.

Make sure you read all the info on the PRTB website so you don't fall foul of them in case of a dispute.

The above will easily wipe out your small profit, so you won't have to pay any income tax. Even though you don't anticipate a profit, you will, however, need to register for self-assessment with Revenue.
 
Excellent post Delgirl. That should be a keypost or a sticky or something.
 
Thank you all very, very much. There is fantastic information here. Really appreciate it. I honestly didn't have a clue what I was supposed to do. Thanks.
 
Just another quick question, if you move overseas, can you claim some of the travel say once a year to visit the property to ensure its general maintenance/wellbeing. I know of other countries with this rule, just wondered if Ireland was the same..
 
Howitzer said:
75% of interest portion of the mortgage payment.
Click to expand...
Open to correction on this but am I correct in saying that 100% of interest is allowable for first 4 months of 2009 (when budget took place) and 75% for remainder of the year?
 
SLS said:
... can you claim some of the travel say once a year to visit the property to ensure its general maintenance/wellbeing...
Click to expand...
No from Revenue's perspective you have the choice of not moving or of appointing a local agent.

BTW, if you do not appoint a local agent, your tenant is obliged to with-hold 20% of the rent and remit it to the Revenue.
 
Great info in this thread...

re appointing an agent if going abroad: If I appoint a brother or sister as an agent (i.e. a rent collector and point of contact in case of a problem) and they are PAYE workers, does it affect their tax return in any way? - Just where is the rent they collect on my behalf reported (on their return?) and if I pay them a small fee for doing this, does that complicate their otherwise straightforward PAYE return?

Also, I noticed this on myhome.ie
"If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)."

I never heard of this anywhere else and I can't find a reference to it on revenue.ie or elsewhere.

Is this correct? If so how does the tenant pay/who collects? - what paperwork is involved on their or their landlords (or their agents) end?
 
Pauley said:
... If I appoint a brother or sister as an agent (i.e. a rent collector and point of contact in case of a problem) and they are PAYE workers, does it affect their tax return in any way? ...
Click to expand...
Not unless you pay them.
Pauley said:
... Just where is the rent they collect on my behalf reported (on their return?) ...
Click to expand...
It isn't because presumably they'll lodge it directly to your account if you leave them account details or a lodgement book.

Also remember to leave your PPS number and address for your tenants who will no doubt want to claim tax-relief on the rent they pay...
Pauley said:
... and if I pay them a small fee for doing this, does that complicate their otherwise straightforward PAYE return?...
Click to expand...
No, they just enter the small fee as untaxed income on their tax return.
Pauley said:
... Also, I noticed this on myhome.ie
"If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)." ...
Click to expand...
Sorry, I can't help you here
 
Pauley said:
Also, I noticed this on myhome.ie
"If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)."
Click to expand...

I don't know what this refers to but it has nothing to do with the normal renting of houses/apartments. It's probably something to do with leases of commercial premises (shops etc)
 
If you have a relative etc. acting as agent, they should request a new (secondary) PPS number for this purpose.
 
...Cheez they certainly know how to complicate things. I can't inflict that sort of overhead on my siblings! So either the tenant becomes liable and witholds 20% of the rent or my appointed agent becomes the rent recipient and has the joy of filling out another tax return. What a mess...
 
For those of us that aren't lucky enough to have siblings that can act as agents, how do you go about finding a "good" agent?
All of the discussions on this site and others whenever this discussion starts basically just state very usefully, stay well away from them.

Not really an option when you are moving overseas. We are hoping to go in next 6 months so just wondering where to start looking?
 
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