Property investment question

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Hi All

Asking for somebody.

If a state pensioner sold their house and had enough for new house and bought a second property in cash to rent out would they pay tax on the rental property income. If so how much? Also how much tax would they have to pay if they sold the property?

Is there anything else that should come into consideration in doing this?

They want to have some sort of income and investment for their dependents in the long term.

Thanks
 
Do a search on the site, the topic has been discussed extensively, taxes direct and indirect are indeed payable.
 
There are a lot of variables here.

Assuming they sell their family home (PPR), which has always been their PPR then they will pay no tax on sale of this property.

Pretty much all income in Ireland is taxable, how much tax you pay depends on circumstances.

Indicatively, for over 70, contributory state pension is approximately €12,500/year and you can earn approximately another €3500 without paying any tax (you will pay a small amount of USC though)

Assuming they were targeting an income of €12,000 after all costs, annual net income from the rental would be just under €10,000.

If they have other sources of income, these calculations will differ - can you give a bit more background?

If the rental property was sold after a period and the value had increased, the increase in value is subject to capital gains tax @ 33%.

Regarding other considerations, bear in mind that rental properties require maintenance, property tax, agents fees, PTRB registration etc etc - there can be years when there is zero profit from a rental following a bad tenant etc.
 
Thanks you. What is PTRB please?

They are over 70. Just state pension. Family home sold and downsizing so wanted to use rest of money from sale on a property to rent with the view it would give some income and be a safe investment for dependents after they pass. No other income and will be living on their own in the primary residence.
Edit to say this is a singe person
 
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Just throwing it out there.

Could they gift the funds to their children now when they need it more? SVR mortgage and all that.

Children could support the parent going Forward.
 
At worst, the rental income would be taxed at 20% with no PRSI and the lower rates of USC.

Perhaps there would be merit though in having a larger property and availing of rent-a-room relief?

The Age Exemption is €18k by the way, not €15k/€16k as someone was suggesting.
 
By way of an alternative to a rental property, your friend might consider investing the surplus home equity in an income-focused investment trust (something like City of London Investment Trust plc, which has a current dividend yield of 3.88% and has increased its dividend payout every year for the last 50 years).

Your friend would have to open an account with a broker to buy shares in the IT but after that s/he can just sit back and collect the quarterly dividend payments - that's a lot less hassle than trying to manage a rental property.

While it's not entirely without risk (nothing is unfortunately), you would have a reasonable expectation that the share price would at least keep pace with inflation over the medium term, while providing a reasonable supplement to the State pension in the meantime.

Hope that helps.
 
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Questioner said:
Thanks you. What is PTRB please?
Click to expand...
Private Residential Tenancies Board: https://www.rtb.ie/

If you or they have never heard of the PRTB, then I would steer clear of becoming a landlord to be honest. It may sound like a simple plan, but as many LLs on here will vouch for, its not just sit back and collect rent each month, far from it.
 
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