Letting principal property (under mortgage) at a loss while renting elsewhere. tax?

My wife and I own a house (under mortgage) which we are renting out to tenants.

We are currently also renting ourselves, in a different location.

We are making a loss on the rental situation (ie. paying more than we are receiving).

What are our tax liabilities on the property we own and are renting?

The house we own is our only property.

You should be subject to tax on any rental income less 75% of mortgage interest, capital allowances on fixtures and fittings, repairs, service charges, PRTB charges, management fees and accountancy fees.

The above list isn't exhaustive.

There's also the NPPR charge to pay which isn't deductible per Revenue.

In order to claim a deduction for interest on the mortgage, the tenancy must be PRTB compliant.

Only interest arising on a loan for the purchase or improvement of the property is deductible.

The fact that you're not making a profit on the deal isn't sufficient...you may be including the capital element of your mortgage repayments or 100% of the interest or expenses that aren't deductible.

Hope this helps.

Any questions, feel free to post or PM me.

Regards

Gordon

Thanks for quick reply Gordon, now back a step for the slow witted !! Mortgage interest is a dynamic figure, reducing over the period of the mortgage ??

AlanShep said:

Thanks for quick reply Gordon, now back a step for the slow witted !! Mortgage interest is a dynamic figure, reducing over the period of the mortgage ??

Click to expand...

True, but your bank can provide you with a figure for the interest charged during any given year...you just request it, multiply it by 75% and then claim it as a deduction against your rental income (subject to the loan being for the purchase, improvement or repair of the property in question).

Great thank you for the quick efficient help

Rgds

Alan

Typical 2011 rental income computation might look like this:

......................................€ ................€

Rental income:..............................12,000...(€1,000 x 12)

Less expenses:

Mortgage interest...........7,500.....................(€10,000 x 75%)
PRTB registration................70
Repairs............................500
Service charge................1,500
Letting fees .....................800
Accountancy fees...............500
..................................................(10,870)

.....................................................1,130

Capital allowances:..........................(500)

Taxable:..........................................630

And your 2011 capital allowances computation might look like this (basically, you're rarely entitled to an upfront deduction in relation to what are deemed capital items):

Year...........Item...........Cost.........TWDV b/f........W&T......TWDV c/f

......................................€.................€..................€................€


2008...........Fridge..........800..............500..............100.............400
2009...........Couch........2,000...........1,500..............250...........1,250
2010...........Cooker.........400..............350................50..............300
2010...........Beds............800..............700..............100..............600

2011 capital allowances:.......................................500

There's plenty of commentary out there regarding what constitutes a capital item. When opining on whether an item is capital or revenue in nature, ask yourself does it result in an enduring benefit? For example, a table should clearly be there for more than a year but (say) a (standard) light bulb probably wouldn't be.

Moved from Taxation to Property investment and tenants' rights which is where this issue is dealt with on AAM.

Title expanded.