Tax on letting home and renting another

[peno]

Just a quick general question I have out of a matter of curiosity that somebody might answer quickly.

If I own a home i lived in and let that out I would expect to pay tax on the income. If however I then rent out another house to live in do i still pay tax or is it only on the difference of the different rents that i pay tax on.

As i said just a curiosity i have. As we know a lot of people are letting their homes as they are in negative equity and no longer practical and they are then renting more appropriate houses. Just wondering have people really thought about the tax consequences if any in doing this.

 

[misemoi]

Short answer no, you can't offset rental expense against rental income. you can however offset 75% of interest expense on the mortgage of the property you are renting (subject to registering with PTRB), depreciation on furniture, letting agent fees, accountant fees etc. There are a number of expenses you can offset. Then tax and PRSI are payable on the profit. Also you may have a rate change on your mortgage to reflect that it is no longer a PPR and are no longer eligible for interest relief. Also consider that if you have a tracker mortgage the 75% interest deduction may not be significant. And the additional income will be counted for other things, eg further education grants, eligibility for welfare payments. So it is worthwhile doing the numbers as there may be a significant cost to moving overall. But for a lot of people it is not just a money issue, it is a suitable accomodation or proximity to where the work is issue. And of course there are plenty of people who do not declare the income.

 

[peno]

Thanks misemoi that's exactly what I thought
I fear a lot of people could be creating a bigger hole for themselves as I know people in this situation and I suspect they are ignoring the whole taxation issue on the rent they receive

 

[mandelbrot]

Thanks misemoi that's exactly what I thought
I fear a lot of people could be creating a bigger hole for themselves as I know people in this situation and I suspect they are ignoring the whole taxation issue on the rent they receive

If they have a big enough mortgage then they may have little or no tax exposure, provided they have the tenancies registered with the PRTB.

 

[ashambles]

If they have a big enough mortgage then they may have little or no tax exposure

There's quite a large crossover between people with large mortgages and tracker mortgages so there may not be a whole lot to write off, for instance 250k mortgage @ 1% is only around 210 euro per month of which you could use 75% or 157 to offset against tax. (Warning: I'm not sure about the workings of of mortgage interest relief)

So on a 250k mortgage on 1% interest rate and you were earning 1k in rent, ignoring charges and tax deductibles for now, that would leave you with 480 euro + 157 euro = 637 euro. That wouldn't be too far off mortage which would be around 800 euro a month for that type of mortgage. However I suppose some might prefer the 1000 euro and not pay tax, and have something left over after the mortgage to help with the rent elsewhere.

It's fairly common advice to tell people who decide to rent out a PPR to not inform the bank as the tracker could be pulled from them as they've broken the terms of the mortgage. I am beginning to think that people are taking the same attitude to informing revenue as they are the bank.