Renting a Property - The Options (Rent a Room versus Fully Declare)

W

WarrenBuffet

Registered User
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Hi,
My son has a query regarding renting his house. He bought a house in Cork 2 ½ years ago – however he now lives in Dublin due to work commitments (in the current climate he isn’t exactly in a situation to refuse!). The house is a 3 bed semi-d about 5 mins from Douglas village – he reckons in the current rental market he could get around €1000 per month for it.

To help meet the mortgage he would like to rent out the property. As far as we can make out he has three options:
  • Option A: Rent out house as per rent a room scheme (i.e. get a max of €833 per month for it). We think this would allow him to keep TRS also (roughly €180 per month). Is this correct? Is the government likely to change this in the next budget and end up with him even being more out of pocket (mortgage is €1400!)?
  • Option B: Rent out house for €1000 and declare it. This would mean he would pay tax at the marginal rate for 25% of rental income. Again is my thinking here correct? If he does this can he then offset expenses incurred on the property against the tax liability?
  • Option C: Take rent in cash – to be honest this is not the road we want to go down.
Any thoughts would be much appreciated. Is there an obvious option we are missing?
Thanks,
WB
 
I think Option A is also dodgy, as he is not living in the house. Rent a room is only for your Primary residence. Whether you want to go down that route or not is up to you.

Option B makes most sense, stays on the right side of the revenue, will go a long way towards paying the mortgage and I can't imagine much tax being due as most of the mortgage repayment at the moment will be interest of which he can take 75% of as an expense against his rental income.

Peadar
 
You cannot use the ren-a room scheme. You must reside in the house for this to apply.
Also tthe rental threshold is 10k p.a.
Not declaring is illegal. Also he can be caught via the tenant claiming the rental credit.
John Conlon conlonosullivan.ie
 
If your son was originally exempt from stamp duty, it will become due if he is renting out the property and not living in it.
 
airgead07 said:
Is this true about the stamp duty becoming due if you rent out the house?
Click to expand...

No Once you have owned the house for 2 years + when you start renting it out, Stamp duty is not due.
You can rent a room under the rent a room conditions immediately after buying
 
Just read on another post and think I am correct in saying that the stamp duty clawback only applies if you rent out within 2 years of purchase, and you have rented the house out before Dec 07.

BER Cert is also now required for all rental properties from Jan 09.
 
airgead07 said:
Just read on another post and think I am correct in saying that the stamp duty clawback only applies if you rent out within 2 years of purchase, and you have rented the house out before Dec 07.

BER Cert is also now required for all rental properties from Jan 09.
Click to expand...

SD clawback applies if you rent out within 2 years of purchase so long as you rent out *after* Dec 07. If you rented before Dec 07, then you had to have owned the house for 5 years prior for clawback not to apply. For e.g. if you bought in Jan 2004 and rented out from Jan 2007, then you would be liable for clawback notwithstanding that you owned the house for more than 2 years prior to rental. Once the first letting is after Dec 07 (the 5th of Dec I think), then you have to own for 2+ years to avoid clawback.
 
Your son will need to register each tenancy with the PRTB. If you do not register you can't claim the interest on the mortgage. See also here
See the Revenue Guide to Rental Income for what you can claim. In the recent budget the interest element you can claim as an expense is limited to 75%. The guide has not been updated.
Your son will be taxed on the profit at his marginal rate of tax plus the new levies
 
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