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Only 75% of the interest is allowed as a deduction .
If you rent out your apartment at 850 per month, The expenses you will have are:
Non Principal private residency tax €200 per year
Private residency tenancy board €70 each time you change the tenants.
BER energy rating €150 -€200 ( this rating lasts for 10 years)
Insurance (This is a different type of policy for rental properties)
Apartment management Fees
General repairs and upkeep.
The expenses you can claim against income tax are:
The interest portion only of your mortgage, repairs, upkeep, BER, PRTB,
Management fees, Insurance.
The expenses you cannot claim against income tax:
NPPR Tax, The repayment portion of you mortgage.
Income tax will be due on the balance.
The mortgage may have interest relief already deducted for you principal private residence, if so your monthly repayments will increase by that amount.
there is a big chance that the govnt may not allow any interest against tax on rental income.
Waxy - this is not meant to be rude but ...
.. there are several posts in this thread on property investment that will answer many of your questions.
There are other sites such as irishlandlord.com. Also the Revenue.ie have a guide to rental income online
If anything is still unclear then this is a great thread on which to ask. Also, regarding an advisor -an accountant probably - thats not a bad idea, but they cost money so it's best to acquire some free knowledge first before paying for his advice.
However as its raining and I cant garden at the moment, I'll give a very rough quick breakdown...
your new rental home cost 12k - but you are getting 10k rental incomefrom your own property.
After you have paid the costs listed by Brown,including a heavier-than-before insurance you may end up with 7k/8k -and thats assuming tenants are always paying or dont wreck the place.
You can -at present- claim 75 % of the interest that you Pay on the loan. I dont know what interest you pay, but let's say its 6k, so you can claim 4.5K against tax so, really, your taxable income is only 3/4k - you will pax tax of between 1k to 2k depending on your tax bracket.
So, out of the gross rental income you will keep about 5/6k. Not great is it ?
This is very rough and there is a big chance that the govnt may not allow any interest against tax on rental income.There is a fear that this may be cancelled or diminished.
And finally - I must dash -it's sunny again...
you may lose your tracker mortgage . It depends on your bank and loan conditions. banks dont like trackers.It costs them money. If you tell them ,or if they find out that you are not living in your owwn property then they stick you with a much higher interest rate.
A couple of percent extra on your loan could wipe out any so-called rental profit.
You could end up with a total extra cost of 8.000 euros for that extra bedroom.
Now, read the other posts...
are you having a laugh? A government doesn't turn a blind eye to tax evasion! Thats money out of their pockets!
It's definitely a key area on which Revenue is concentrating. I believe they are checking PRTB registrations (without which you can't claim the 75% mortgage interest against tax) and checking tenants' applications for rental relief against landlords' declarations of tax.
I agree that there are probably lots of people renting out their properties without declaring the income, but I think, apart from the moral and legal problems, it's a high-risk course of action.
mcgibney - the reason I wrote with some emphasis that I fear that the govnt will abolish or diminish tax relief on interest paid is because :-
1) the precedent has been established -already 25% has been cut. The govnt is also slowly ceasing tax relief on home loans. It seems a natural progression to abolish it on rental income.
2) Landlords are wicked evil money grasping villains in the eyes of many - abolishing or diminishing the relief would be less unpopular than many other possible steps.
3) Above all, I wanted Waxy to be aware that whatever is the rental income situation today could be - probably will be - much tougher in a year or so.
I'm probably too pessimistic but everything about rental income in the last few years has made me so, thus I urge Waxy to be very cautious about renting another place and letting his own.
Possibly because it would cost too much to detect the evasion and they are putting their money into other areas that are costing them more money?
Can't see how they'd crack down on this one to be honest..
In reply to your query,yes rent tax relief has been abolished for new leases.
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