Let our 1bed apt and rent a 2bed apt. Tax, mortgage, NRPT etc implications.

Hi,

My wife and I are moving out of the one bed apartment we bought back in 2007 to move into a rented 2 bed house with our baby.

We cannot sell the apartment as we are in negative equity so will need to rent it out. Looks like we will get around €850 rent and the mortgage is currently around 950 per month.

My question is what exactly do we have to do to register ourselves for tax etc?

Also would anyone be able to work out roughly what our tax bill for the year will be?

Also will we lose our mortgage interest relief or our tracker mortgage?

I am told we would not need to inform the bank of this and may be able to hold onto it if we keep our banking address at the apartment.

If this question is too difficult to answer without knowing more specifics can anyone reccomend a tax expert/accountant I can go to and also and how much they would cost for a consultation?

Thanks for any help.

There are so many posts on all these questions that you really should read them - as well as Revenue.ie

You're going ahead with this move without knowing the answers to the questions ? Most unwise. You could be in for a big shock.

Nothing decided for definite, nick, but have no real choice I'm afraid, our child has health difficulties and we need more space.
Could you recommend someone I could go to for advise? Or even what type of person, would it be accountant or what?

O.K. As an old git that likes to waffle here are some questions that I and other posters can better advise you on.

-what is your monthly or annual interest payment ? Repeat -interest not total payments. (You are presently allowed 75% of the interest payments against tax on your rental income. Bear in mind that you will lose any tax relief on your mortgage payment)
- Are you on or near the lower or higher tax band ? (basically are you losing ca. 30 or 50% of each extra euro you earn bearing in mind tax, USC, PRSI etc)

Take an example of Fred who pays 800 euros per month interest out of his 950 mortgage. 600 of that 800 is allowed as an expence against tax.

So, out of 850 euros you can claim 600 and your monthly rentable taxable income is therefore 150 -not too bad. You lose either 50 or 75 each month to tax depending on your tax band level.


for someone paying a lot of interest on the loan for your one-bedroomed apt as you will be ,having only just started a mortgage then much of the interest you pay will be allowed against tax ( warning -this may change in the budget!).

Therefore your idea is worth considering and there are other costs that you can claim (again ,read revenue.ie) but....

- you must get paid every month. Have you funds to suffer a scumbag tenant who doesn't pay ,or vacates sudenly, or leaves a right mess.

- there are increasing charges on landlords which may increase in the Budget -maybe 300 a year maybe 500 - we don't yet know. Wait for the Budget to decide.

- Do you have nice stuff in your own apartment ? You may not have in a couple of years .....

- As regards an accountant. I tend not to use them for my own lettings but they are invaluable for people just entering this field, and could suggest ways of maximumising your income by pointing out things that most people don't know about...

We are not allowed to advertise but perhaps a regular poster who is an accountant can send you a personal message offering their services. Everything can be done on line so it doesn't matter where they are. Even Cavan.

Thanks nick I'd say we are both just about in the 42 per cent tax band earning around 35/40k each average.

Can't find some of my documents relating to my exact mortgage repayments etc but will ring bank to get them sent out tomorrow. I found one saying that my interest charged for last year was around 5,800. It says tax relief claimed was around 1,200.

Does that mean that my mortgage repayments will go up by 1200 a year but that i'll be able to take 5,800 off my total rental income for tax purposes?

So... 850 x 12 = 10,200 is total rental income
take away 5800 in interest leaves 4,400
Away from which I can take management fee (around 1200) and some other expenses?
And the final total will be taxed at 42 per cent?

Am I right? looking fairly expensive already!

Actually the final total will be about 50% - don't forget USC, PRSI etc.

And some expences are NOT tax deuctible. NPPR is - according to many - not tax deductible (i dispute this). Property tax will come in at 100 euros buteveryone says it will greatly increase -whether this will be tax deductible on rental income I don't know.
Other charges like PRTB, BER, are deductible.

For anyone on the higher tax bracket rental income ain't great -and the lower your interest payments the lower the nett profit; in other words if the interest doesn't get you the taxman will.


Now -and this is where an accountant is useful... I trust you know the difference between mortgage interest relief at source(MIRAS) to which you are presently entitled (though this is diminishing each year) - and claiming interest rkeief on an investment property which is what your present home will be. You will lose the MIRAS when going down the rent-it-out route.

Whether or not you declare all this to the bank (and indeed the taxman) is your own business.

Anyone doing what you contemplate is surprised at how pricey the plan is.

Have you approached your lender re a negative equity loan ? This would be the best option -especially if you could raise a bit of cash. Your joint income is high and it would make sense to sell your apt ,borrow an extra 100k and buy a proper home.
Some banks are coming round to the idea of this -but obviously selling a one bedroomed apt is pretty tough at present.


( I'm puzzled that your monthly interest (483) is about half your total mortgage repayment(950). I would have thought at an early stage of your mortgage -the 4th year -the interest component would have been much more than the capital repayment. Anyway, whatever is the interest portion you are allowed to declare 75% of it against rental income. But who knows what the Budget has in store?)

Good luck - I hope you really study this before making a decision.