Investment property/no mortage

[alri]

I wonder if anybody has any sugestions as to what my best course of action is,my wife owns an apartment which was given to her as a gift,(value c350k)this is currently a rental property for which we receive no tax relief,income is 1,00 pm,our own mortage is 100k,
Is there any way to maximise the earning potential of the property??I guess its having to pay the full tax which is the killer.

 

[jhegarty]

I wonder if anybody has any sugestions as to what my best course of action is,my wife owns an apartment which was given to her as a gift,(value c350k)this is currently a rental property for which we receive no tax relief,income is 1,00 pm,our own mortage is 100k,
Is there any way to maximise the earning potential of the property??I guess its having to pay the full tax which is the killer.

i persume that 1,000 per month....

could you morgage the rented place @ 100k , and pay off your own morgage ?

not sure on the legality of it... you might be best talking to na account, for the sort of money going around here it should be worth your while...

 

[ClubMan]

could you morgage the rented place @ 100k , and pay off your own morgage ?

That will be of no benefit since the mortgage will not be to purchase or renovate the investment property but to clear the PPR mortgage. There is no scope for tax relief here unless money is borrowed to renovate/improve the investment property. Only interest on loans used to buy or renovate/improve investment properties can be written off against rental income. You may be losing sight of the fact that while you don't get tax relief on the expense (mortgage interest on the investment property mortgage since you don't have one) neither do you incur the expense in the first place so you are no worse off. There is no point in incurring expenses just to write them off against rental income since it is a zero sum game.

 

[stuart]

You should be receiving tax relief at source onthe interest paid on the 100k mortgage on the PPR, albeit it only at the 20% rate

So in essence you are at most losing the difference between the 20% rate and the 42% rate (if apporpriate) plus PRSI

One option depending on when the investment property was inherited would be to sell the investment property pay off personal mortgage and purchase another property using a mortgage

This could involve CGT but will include stamp duty, solicitor fees and estate agent fees
This will more than likely make it less profitable to do
You would need to calculate it

Or another option would be to purchase another investment property borrowing the full purchase costs between the existing and the new and use this to reduce the tax liability
Again youwould need to calculate is this was profitable or not

A third option would be to purchase a tax incentive property, possibly a S.23, to "shelter" the income
If the taxable income is around €12k p.a. this again might not be financially advantagous

There are some options but most will include doing something a bit more constructive than obtaining a mortgage, unfortunately

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[delgirl]

i persume that 1,000 per month....

could you morgage the rented place @ 100k , and pay off your own morgage ?

not sure on the legality of it... you might be best talking to na account, for the sort of money going around here it should be worth your while...

This was discussed previously in this thread http://www.askaboutmoney.com/showthread.php?t=14093

You can only increase the loan on the investment property and offset against rental income if it is being used to renovate, extend the investment property and not to pay off the loan on your PPR.

and there's more on this topic here http://www.askaboutmoney.com/showthread.php?t=15327

If the property is in your wife's name and, assuming she has no other source of income, or your combined incomes are less than E58,800, you will pay only 20% tax on the rental income.

I also have a property I own outright and I make sure it is well maintained for future rental / sale, with these costs of course being deductible.

 

[ClubMan]

You should be receiving tax relief at source onthe interest paid on the 100k mortgage on the PPR, albeit it only at the 20% rate

Just to clarify the amount of PPR mortgage interest subject to owner occupier mortgage interest relief is capped although the amounts here may fall under these caps. See [broken link removed].