Renting out apartment

K

kasko

Registered User
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75
Hi,
I have recently bought an apartment from plans and intend to rent it out once it's been completed. My mortgage will work out about 1000 euro a month. So my question is: what amount of tax am I to pay for renting it out or in other words, how much will the rent have to be in order for me to get those 1000 euros after tax to service my mortgage?

Thank You
 
Check the FAQs and key posts in the Property Investment section. You may also be liable for stamp duty clawback. When you sell the property, you will be liable for Capital Gains Tax.
 
kasko said:
Hi,
I have recently bought an apartment from plans and intend to rent it out once it's been completed. My mortgage will work out about 1000 euro a month. So my question is: what amount of tax am I to pay for renting it out or in other words, how much will the rent have to be in order for me to get those 1000 euros after tax to service my mortgage?

Thank You
Click to expand...
The rent will be what the market dictates not what your costs are!
 
AFAIK the tax you pay on rental income is at the same rate as your 'normal' income tax so 20% or 42% of Gross rental income. As Bearishbull states, you cannot construct a rental charge based around your circumstances, it depends on what other properties in your area/street are renting for.
 
It is the profit on rental income that is taxed not the full rental income
Rental Income less allowed deductible expenses. See [broken link removed]
 
Hi asdfg,

'less deductible expenses' is not profit.

Rental price - (mortgage repayments + expenses) = profit

It is not only the profit that is taxed, the whole lot is taxed.
 
From the Revenue Guide that asdfg linked to above:

How is profit/loss rent calculated?
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The rental profit or loss is calculated by reference to the rent or total receipts to which the person becomes entitled to in any tax year (as opposed to the period to which the income relates).

Example:
Mr. White began leasing a house from Mr. Brown on 1 December 2003. Mr.White pays rent of €2,000 in 4 annual instalments on 1st of each quarter. He paid €2,000 on 1 December 2003. His landlord Mr. Brown became entitled to receive the quarters rent on that date, therefore the entire €2,000 is taxable income for 2003. It is important to note that the €2,000 is not apportioned as to make two thirds of it taxable in the tax year 2004.

A separate rental computation is prepared for each property whereby the rental expenses for each property are deducted from the related rental income for the same property in order to arrive at a surplus (i.e. income greater than expenses) or a deficiency (i.e. expenses greater than income) for each property. The total of surpluses and deficiencies are then aggregated to arrive at profits or gains arising in the year, i.e. taxable rent.
Click to expand...
 
If this is an interest only mortgage and you are paying 1000 euros per month, there is no tax liable.
If it is a fixed term mortgage and you are paying off the capital, then the calculation will be as follows.

Rent = 1000 per month
Payments = 1000 per month. Of this 1000 euros, 900 is interest and 100 is paying off the capital, then you are liable for tax on the 100 euros.

Since the interest charged is tax-deductible, this is why many investors take out interest only mortgages on investment properities.

I hope this answers your question.

PK.
 
Nothing to add to the answers provided above.
Just sorry to read about an other person doing some "thinking" after having done the "buying".
 
kasko said:
Hi,
I have recently bought an apartment from plans and intend to rent it out once it's been completed. My mortgage will work out about 1000 euro a month. So my question is: what amount of tax am I to pay for renting it out or in other words, how much will the rent have to be in order for me to get those 1000 euros after tax to service my mortgage?
Click to expand...
Kasko,
have you checked how much similar apartments rent for in the area is at the moment?
Has the rent been increasing or decreasing in the area?
How many apartments in total are being built in this development? Have many/all of these been bought for rental as well?

All of these factors will determine the rent you can hope to achieve once the apartment is completed.
 
Hi, thank you all for your replies.
Someone said that I am doing "thinking" after "buying". That's not correct since the property has not been bought for investment. Due to change in circumstances, I have been considering the renting option and wanted to learn the tax implications. I am well aware that the market dictates the rent, that's a reason for renting it out
 
kasko said:
Hi, thank you all for your replies.
Someone said that I am doing "thinking" after "buying". That's not correct since the property has not been bought for investment. Due to change in circumstances, I have been considering the renting option and wanted to learn the tax implications. I am well aware that the market dictates the rent, that's a reason for renting it out
Click to expand...

If you bought it as a FTB/Owner occupier and you now rent it out,you are now liable for stamp duty .
 
Just so there is no misunderstanding profit on rental income is calculated as follows

See [broken link removed]

Rental Income

Less allowable expenses See [broken link removed]

If a profit - taxed at 20% or 42% depending on other income

If a loss see [broken link removed]
 
kasko said:
Someone said that I am doing "thinking" after "buying".
Click to expand...
Yes, it's meeee....

kasko said:
I have recently bought an apartment from plans and intend to rent it out once it's been completed.
Click to expand...
That really reads as an investment property to me..

Anyway, you said your circumstances have now changed.. Are you locked into "buying" or do you still have the option of cancelling?
Unless you have many properties rented out, i do not think it is wise to buy to let now... yield is very very bad.
€1000 per month repayment: is that with interest only mortgage?
 
asdfg said:
Just so there is no misunderstanding profit on rental income is calculated as follows

See [broken link removed]

Rental Income

Less allowable expenses See [broken link removed]

If a profit - taxed at 20% or 42% depending on other income

If a loss see [broken link removed]
Click to expand...

And what about the 2% health levy???????

If a profit - taxed at 22% or 44% depending on other income
 
Hi again.
Ok, I'll make it a lot more simple. At first, the whole purpose of buying this apartment was to live in it or make it a home. However, the place we are renting now (a house) costs 700 euro a month, and we have been offered to stay in it as long as we want (me and my family).
If we moved into the apartment once it's completed, the mortgage repayment would be 956 Euro a month (before the tax relief) for the first year (based on 2.49 %). After that the APR is 3.5 %. I believe these APRs are on the rise at the moment, however, effect on amount of instalment of 1 % increase brings repayments up to extra 130 Euro.

So, what I had on mind was to stay and rent the current place, and let out the apartment. That would enable me to literally save 300 Euro a month provided that the tenants service my mortgage. In case I do not get sufficient amount of rent, I always have the option of moving in and repaying the mortgage as planned in the first place. Does this make sense?

Someone mentioned stamp duty and health levy. Am I subject to stamp duty? We were first time buyers.
Thanks
 
kasko said:
Someone mentioned stamp duty and health levy. Am I subject to stamp duty? We were first time buyers.
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As you will not be owner-occupier if you decide to rent the property, you have to pay stamp duty at investor rate (regardless of you being FTB or no), and lose your status of FTB in the process.
 
kasko said:
Hi again.
Ok, I'll make it a lot more simple. At first, the whole purpose of buying this apartment was to live in it or make it a home. However, the place we are renting now (a house) costs 700 euro a month, and we have been offered to stay in it as long as we want (me and my family).
If we moved into the apartment once it's completed, the mortgage repayment would be 956 Euro a month (before the tax relief) for the first year (based on 2.49 %). After that the APR is 3.5 %. I believe these APRs are on the rise at the moment, however, effect on amount of instalment of 1 % increase brings repayments up to extra 130 Euro.

So, what I had on mind was to stay and rent the current place, and let out the apartment. That would enable me to literally save 300 Euro a month provided that the tenants service my mortgage. In case I do not get sufficient amount of rent, I always have the option of moving in and repaying the mortgage as planned in the first place. Does this make sense?

Someone mentioned stamp duty and health levy. Am I subject to stamp duty? We were first time buyers.
Thanks
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Budget for 5% mortgage within next 2 years and allow for 2months vacant per year in apartment.your rental situation looks very good at present,i wouldnt be rushing out of a long term house rental only costing 700euro a month
 
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