Tax on Rent (no mortgage)

I

imalwayshappy

Registered User
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Morning All,

At a high level, I have an investment property (no mortgage). I am looking at giving it to the council on a 10 year lease. Gross rent 12k per annum. Rough calc on tax is 50%. Net rent is €6k. Is there any options for reducing my tax liability? I can't obviously offset any allowances against the rental income and rent is not classed as earned income so I cant get tax relief on it if I pay into my pension(I think). Are there any other options open to me?

Many Thanks
 
The only other ways to reduce it is via capital allowance.

Check here for good breakdown on what that includes and the amounts etc

www.fenero.ie

Landlords – Claim Tax Relief on furniture in your Rental Property

Capital allowances are regularly overlooked by landlords. Many of our new clients are delighted to hear we can reduce their tax liability using claiming tax deductions for furniture and fittings in their home. What is a capital allowance? A capital allowance is just a name for a certain kind of...
www.fenero.ie www.fenero.ie
 
azerogo said:
The only other ways to reduce it is via capital allowance.

Check here for good breakdown on what that includes and the amounts etc

www.fenero.ie

Landlords – Claim Tax Relief on furniture in your Rental Property

Capital allowances are regularly overlooked by landlords. Many of our new clients are delighted to hear we can reduce their tax liability using claiming tax deductions for furniture and fittings in their home. What is a capital allowance? A capital allowance is just a name for a certain kind of...
www.fenero.ie www.fenero.ie
Click to expand...

Thanks but I don't think I can claim any of this as the Council is responsible for the upkeep etc. If the washing machine breaks down the council repair it not me. As far as I understand it I just get paid every month and the I receive the house back in 10 years time near the condition I gave it (thats the promise anyway)
 
How old and in what condition is your property ?Would you consider doing an upgrade to the property before you sign up for the ten years with the council ? This would give rise to capital allowances over the lease period.
 
Thanks, It was built in 2010 so it is new enough. The condition is good. I suppose I could consider building an extension/convert the attic. I assume it would be 12.5% of the extension cost over 8 years that could be claimed?
 
An extension/attic conversion would be an e.nhancement - allowable against CGT, not income tax.

In any event, incurring a cost just to generate a tax deduction makes no sense.

Are you maximising your pension contributions in respect of your earned (non-rental) income?
 
Sarenco said:
An extension/attic conversion would be an e.nhancement - allowable against CGT, not income tax.

In any event, incurring a cost just to generate a tax deduction makes no sense.

Are you maximising your pension contributions in respect of your earned (non-rental) income?
Click to expand...

yes currently maxing out my full AVC, no scope there i'm afraid!
 
IMHO property investment with no interest relief and tax at marginal rate doesn't make a huge amount of sense.

One idea is to sell current house, and then buy a bigger one with a modest mortgage. If you have RAS tenants you can claim 100% tax relief on mortgage payments and of course you will pull in more rent for the same amount of equity. Worked example below, it's quite simplified but you get the jist.

Downsides of course involve cost of selling and acquiring property, having a mortgage to pay down, etc. It is of course more risky, but has a higher expected return.


Current HouseNew house
aValue
150000​
250000​
bMortgage
0​
100000​
cLTV (b/a)
0%​
40%​
dRent (8% yield)
12000​
20000​
eInterest (100k @4%)
0​
4000​
fPre-tax profit (d-e)
12000​
16000​
gNet profit (f*50%)
6000​
8000​
 
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