Tax Liability

[Nosey]

My father is considering renting out his apartment which he owns and moving into a house which he will rent from another relative.

He expects to receive €950 in rent from his apartment and pay the same amount in rent for the house. He is a retired widower and in addition to the state pension he has a private pension which gives him about €250 per month.

Does anyone know if there are income tax implications for my father. In addition, what are the tax implications for the relative as the mortgage is 1100 monthly and the rent received monthly will only be €950.

(It may appear that this arrangement has no financial logic in it - but lookng out for family overrules financial issues).

 

[dam099]

There would seem to be income tax consequences, has he owned this for long? Is there still a mortgage outstanding with interest payable? He will be liable for income tax on the rent received less expenses including interest on a loan used to purchase the property. As you say this does not make much financial sense, he moves from one property to another and ends up with an income tax liablilty as a result.

There could also be CGT implications if the apartment qualifies as his PPR as he will be liable for CGT for the proportion of the time it is rented versus the time it was his PPR if the apartment is ever sold.

 

[Nosey]

He has owned and lived in the apartment for 10 years he has no mortgage on the property.

Would the income tax liability from the rent not be off set by the rent he has to pay for the house he will rent?

 

[RainyDay]

Would the income tax liability from the rent not be off set by the rent he has to pay for the house he will rent?

No - for tax purposes, they are two seperate unrelated transactions. He could only offset expenses related to the property which he is renting out, such as mortgage interest or other expenses.