18 months ago me and my family purchased and moved into our second house and rented our old house. At the time our broker advised us to borrow as much money as we could against our old house(it was our main ppr at the time)and we would be able to offset the mortgage interest repayments against the rental income.Now a friend has advised me that this might not be above board and there might be tax implications down the line.Is
remortgaging main ppr
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You can only offset the amount borrowed to buy the house orginally or any subsequent amount borrowed for renovation or extension purposes.
I'm afraid your friend is correct, you cannot write the extra amount borrowed/remortgaged off against the rental income for tax purposes, only the interest on the orig part borrowed. For tax purposes, the extra you borrowed was clearly to fund your new ppr so is not allowed by the revenue.
Your broker has given you incorrect and misleading advice. If you have it in writing you should make a complaint.
Robd - Does this also apply for investors?
E.g. Lets say I have a property worth €500k - with a mortgage of €300k.
Lets also asume that after interest repayments I turn a profit of say €100 a month which I pay tax on at €41 (41% og €100)
Then lets assume I remortgage for €100k which results in me breaking even each month due to interest repayments.
Are you saying I must still pay €41 a month ?
E.g. Lets say I have a property worth €500k - with a mortgage of €300k.
Lets also asume that after interest repayments I turn a profit of say €100 a month which I pay tax on at €41 (41% og €100)
Then lets assume I remortgage for €100k which results in me breaking even each month due to interest repayments.
Are you saying I must still pay €41 a month ?
If you re-mortgage to spend on am investment property then it is tax deductible, if not then it's not.
The main reason for securing a loan against your PPR for an investment property is to minimise your interest payments (better loan to value for tracker mortgages etc). This interest is still tax deductible. If on the other hand you borrowed against your investment property to extend or improve your PPR the interest would not be tax deductible.
The reason that it's tax deductible is because it's a business load and therefore a business cost. All costs are deducted before profits are calculated. It doesn't matter what the loan is secured against, what matters is what the money in used for.
ok - just to clarify - with respect to investment properties,if i remortgage and put some or all of the remortgage amount into another property then all mortgage amounts are tax deductible.
As in - lets say i spend half of my remortgage on holidays etc. is the entire amount still tax deductible given that half of it is spent on non-business related suff?
As in - lets say i spend half of my remortgage on holidays etc. is the entire amount still tax deductible given that half of it is spent on non-business related suff?
No - of course not. Why would interest on loans used to pay for a holiday etc. be tax deductible against rental income?
You can offset interest on any loan used to purchase/renovate an investment property against rental income from that property. This is the case regardless of what property (the investment property or one's PPR) that the loan is secured on or even if it's not secured on any property at all. Naturally you cannot claim owner occupier mortgage interest relief on funds raised against your PPR but used for purposes other than the purchase or renovation of the PPR. And you cannot claim owner occupier mortgage interest relief on interest while also offetting it against rental income.
Ok - that's news to me then.
I just remortgaged an investment property recently and spent some of it on goodies for myself while reinvesting the rest on another investment property.
I assumed that all the extra interest on the first propertys remortgage could be put down as a tax expense.
So if my understanding is correct by what u guys have just said, then only the interest on the portion which i reinvested in the 2nd investment property is tax deductible yes?
By the way - is the remortgage interst allowed as a tax expense if the the 2nd investment is overseas?
I just remortgaged an investment property recently and spent some of it on goodies for myself while reinvesting the rest on another investment property.
I assumed that all the extra interest on the first propertys remortgage could be put down as a tax expense.
So if my understanding is correct by what u guys have just said, then only the interest on the portion which i reinvested in the 2nd investment property is tax deductible yes?
By the way - is the remortgage interst allowed as a tax expense if the the 2nd investment is overseas?
Money spent on holidays etc. is not tax deductible at all - i.e. you cannot claim owner occupier mortgage interest relief where the money is raised against one's PPR nor set it against rental income where the money is raised against a rental property.
The money raised on one property to purchase another rental property can be set against rental income from the latter property.
Yes - and only against rental income from that property as far as I know.
Yes as far as I know.
You really should consider getting professional tax advice.
Eh?
I don't understand your query but it sounds like the interest on a maximum of €80K can be set against rental income so you need to calculate what this is when doing your tax return.