Tax implications of renting out your home

[Brendan Burgess]

A friend of mine has asked me the following question and I want to check that the answer I have given is correct.

He works in Dublin but bought a house in Galway 3 years ago with a view to moving home to live in it.

He has not lived in it.

He has rented it out.

He has claimed TRS.

I have told him he has a serious problem which he needs to put right. He has effectively an investment property and it will be taxed as such and not as a Principal Private Residence.

1) He will have to pay stamp duty on the purchase of the property as he was not entitled to claim stamp duty exemption.

2) He will have to refund the TRS.

3) He will have to pay income tax on the rental income less expenses.

4) He will not be able to claim the interest paid on the mortgage against the rental income, as he did not register the property with the PRTB. In practice, is this enforced for informal rental agreements?

5) He has lost his first time buyer status.

 

[Chief Seamus]

Technically you are correct.

However, there may be some circumstances that he is not liable? but I doubt it.
Is he permanently living in Dublin?
Has he rented the house officially?
Is this the only house he owns?
Has he stayed there himself at any point?

The reason for all those questions is that if he stayed there himself (say at weekends) and didn't have a house in Dublin (nor was claiming rent relief for Dublin) he could be considered an owner occupier under the revenue's rent a room scheme.
Depending then on how much rent he was getting he could be entitled to the rental income tax free.
If that was the case, he would not have had to register the property with the PRTB, would still be a 1st time buyer and would neither have to repay the TRS or the stamp duty he saved.