Rental Tax for Owners who pay rent elsewhere

[Bill]

My job moved me to NYC, as such I had little choice but to rent an apartment in NYC, and rent out my house in Dublin, which I had never intended to rent out.

Despite my NYC rent being lower than my mortgage in Dublin, my annual costs have increased because I now pay rental income tax in addition to the usual costs on my Dublin home. The rent I receive covers the regular house expenses (mortgage, insurance, repairs etc), but it does not cover the rental tax.

I think it would be fair if either (1) everyone is entitled to one property (their PPR if they reside in it) that they need not pay rental tax on, or (2) for someone in my position (renting out their home, but renting somewhere else to live) to deduct the rent they pay as an expense before being taxed.

I believe there are many similar situations. Couples who bought a one bed apartment in the boom, and can't sell due to negative equity, but are forced to rent a larger place when they have a family. Likewise people have bought apartments in cities where they had a job in the boom, and are forced to move to Dublin now to get a job, they also must rent out their owned property and rent another property to live in. There are others who lose their job, so move back in with their parents, and rent out their proporty to pay the mortage, but in some case the rent does not cover the rental tax.

What budget change might you propose so that rental income does not create an additional financial burden for people forced to rent out their PPR? Is anyone in a similar position willing to work with me on a proposed budget change?

 

[Joe_90]

Ya, but if you are non resident you only pay 20% income tax not 52% income tax PRSI and USC so I'd imagine that helps.

Given that the Minister increased the rent a room limit to €12,000 where the landlord lives in a rental property (Sorry where someone rents a room in their own house) there may be room for a reluctant landlord deduction for rents paid in certain circumstances.

What would the circumstances be?
1. Property can't be disposed of because of negative equity and
2. House is not suitable due to family size or work situation.

 

[Bill]

The cash cost of renting out my house in Dublin rather than living in it was 5,700 in 2014. If I could offset the rent I pay in NYC, I'd have paid no tax. Tax was about 1,400, and then the Mortgage Interest Relief foregone is another 900 euro. I was unlucky with the tenants in the house, and incurred signigicant damages/repairs, explaining the difference between the cash cost of renting and the tax incurred.

I think the circumstances would be: Owner rents out a property and but rents another property to live in.

 

[Joe_90]

I think the circumstances would be: Owner rents out a property and but rents another property to live in.

If you are in a position to sell the property why should you get a deduction for the rent. I don't think that will wash.

 

[Bill]

Many are not in a position to sell their properties as property prices have fallen. Many are in negative equity.

 

[Sophrosyne]

If you are paying tax on the rental of your Dublin home, then you must have a rental profit. The profit is not taxed at 100%.

 

[Bill]

Taxable income is based only a small faction of my mortgage payment. So no, net renting out the property does not result in a profit for me.

 

[Sophrosyne]

You can set 75% of you mortgage interest against your rental income, in addition to other admissible deductions. You cannot expect taxpayers to also finance your rental payments.

 

[amethyst]

Bill, the proposals you put forward as 'fair' would indeed be fair, but even fairer still would be to allow people a rent deduction on their tax even if they do not own a property, one that is as good at least as mortgage tax relief would be on that property. Why artificially make renting more expensive than buying?

Because governments commonly believe that people buying rather than renting is a public good. And so it encourages people to buy their own property, and it encourages people to live in that property, through a strong financial incentive in the form of the mortgage tax relief. It is questionable that these are good things, however.

Unfortunately, encouraging so many people to be property-owners exposes many ordinary people to the volatility of the property market, which would otherwise be the worry of only investors. It may be a major generator of property bubbles.

All in all, I think these incentives are a bad thing.

 

[Brendan Burgess]

The move to NYC is a distraction. Let's assume you moved from Dublin to Galway to establish the principle.

Taxable income is based only a small faction of my mortgage payment. So no, net renting out the property does not result in a profit for me.

This is bases on a complete misunderstanding of the word "profit" . Your profit is the difference between your income and your interest and other costs. Not the difference between your income and your repayments. You are asking for tax relief on your capital repayments.

If the "taxable income is only a small fraction of your mortgage payment" , it means that you are on a very cheap tracker.

Let's say that your figures are something like the following



It doesn't seem right to me because you have such a profitable investment.

I would have some sympathy for someone who is paying much higher mortgage interest. But then they pay very little tax because they are not making a profit.