Private principal residence to Rented

Cosworth

Hi
I am looking for some advice on the following issue.
I am leaving my job in the new year to join the gardai and therefore i will have to rent out my house as i will not have the funds to pay the mortgage for the next 2 years.

What i would like to know is what way do i stand tax wise, will i be liable to pay tax on the rental income.My mortgage is currently 550 pcm and i will be renting the house for 700 to 750 pcm.

Will i be liable for tax on the whole 750 or just the differance of 150-200 pcm.
Also will i have to change my house insurance and life insurance since i will be changing the resisdance from my private principal residence to becoming the landlord.

Any help on this matter is greatly appreciated.

Regards
Gary.

Bluehair

As it's income you are liable for tax etc in the normal way, I haven't done the maths but it's likely if this is your only income that you'll fall under the income tax threshold anyway especially since you can write off mortgage interest first.

However you should give serious thought to a few things, if it's less than five years since you purchased the house then you could now be liable to pay stamp duty as an investor rather than home-owner (especially if you were a first time buyer). This is a helluva lotta money.

Also by converting the property to a rental you will be making it liable to substantial cgt tax on the profits you make when you sell it on. If you could be selling on within a few years this is also a helluva lotta money.

It's not so simple and I strongly advise you speak to an accountant before making any moves.

Congrats on getting into the Gardai btw but one other point. Bearing in mind training time and a few years where you won't have a lot of say on where you're stationed this is going to be for a lot more than 2 years. Don't be tempted to try and do this on the q-t, the revenue is clamping down on undeclared landlords and it could screw your life up in a big way to be discovered after the event.

Give some thought to other ideas too, i.e. do you have much equity in the house? Would it be worth your while selling up now and taking your gains tax-free (a substantial saving) for a downpayment on a property in a few years when you're settled again?

Either way best of luck and seriously get some professional advice

Victor

Cosworth wrote:

What i would like to know is what way do i stand tax wise, will i be liable to pay tax on the rental income.My mortgage is currently 550 pcm and i will be renting the house for 700 to 750 pcm.

You will be able to write off the entire interest portion (not the capital repayment) against your higher tax rate. However, you will no longer get mortgage interest relief.

If you example, you have lived in the house for 7 years and rent it out for 2 years and then move back in for 3 years (total 12 years), you will be charged CGT at 2/12ths of the prevailing rate (currently 20%) when you sell the house.

Training allowances in the Garda aren't all that generous in the Garda College (but probably beat sa college grant), but I understand they will at least put a roof over your head for at least the next year (and you get paid a further allowance when transferred to a station on probation - but check these out, it might be worth talking to the GRA).