If rent was your only income...

RebelGirrrl

If you rented out a house to travel & didn't have any other income, how much would you expect to pay in tax if the whole sum came to about €15,000?

gurramok

Might be 41%, the higher tax rate.(not sure if levys are applied as well, they probably would be)

hblock21

Pretty sure the first €10,000 would be tax free...........

http://www.homefacts.ie/Rent_a_Room.html

Xiney

rent a room only applies if you're living in the house as well

The_Conductor

It depends on a number of factors for example:

Are you continuing to be tax resident in Ireland? (If not- you need to factor a 20% witholding tax into the equation too)
Are you working while abroad? (if so- you will have to make tax declarations to ensure you are not double taxed on this income)

There are two totally separate ways of looking at this- renting the property out, and the tax treatment of that rental income.

At very least I would expect to loose the 20% withholding tax that any tenant is legally obliged to forward to the Revenue Commissioners if you are out of the country (its possible your accountant could get a sizeable chunk of this back- by depreciation of furniture, fixtures fittings etc- if you've all the receipts etc- but I wouldn't rely on it).

Re: the EUR10k rent-a-room scheme- as alluded to above- you have to be physically living in the house yourself to avail of this scheme.......

S.

gurramok

If the poster is travelling abroad, they are not resident in the house and do not qualify for the Rent-a-room scheme.
As smccarrick says, will you be more than 183 days a year out of the country for tax purposes?

Jo King

There are two taxea to be considered. Income tax and Capital gains tax.
levies will amount to c. €300. Income tax will depend on allowable expenses. The rate of tax would be 20% which the tenant would be oblige to deduct. €1830 of the tax can be recouped if there is no other income. Total income taxex would probably work out about €1500. Depending on when the house was acquired and how long the owner has lived there there may be a capital gains issue down the line. Principal Private Residence relief will not be applied fro the time the house was let. If the house is sold for greater than the acquisition price Cgt will be applied to the profit in proportion to the time the property was let.

Sand Wedge

Regarding residence. Irelands tax year is the same as the calendar year, so the first day of this years tax year was 01/01/2009.

The rules for residence are that you have to be resident in the state for 183 days in a tax year or 280 days on average over 2 consecutive years.

Therefore if OP is only going for year, he will still be deemed resident!

antoinolachtnai

Read http://www.revenue.ie/en/tax/it/leaflets/it70.pdf

It does depend on when you go. If you go now, the income will be lumped into tax year 2009 and you will probably pay at a higher rate. If you go at the beginning of January, it will be less.

The whole thing about witholding tax doesn't really have any impact on the amount that is due. The tax that is witheld is set off against the total tax due.

Might actually be worth getting some professional advice on this, as the difference depending on how you time your trip could make a difference of a few thousand euros.

RebelGirrrl

If I went for more than a year, was travelling around but not working anywhwere?

RebelGirrrl

gurramok wrote: »

If the poster is travelling abroad, they are not resident in the house and do not qualify for the Rent-a-room scheme.
As smccarrick says, will you be more than 183 days a year out of the country for tax purposes?

And if I was?

RebelGirrrl

If you're actually resident abroad or working abroad anywhere are you still non-resident?

Jo King

The tax residency is irrelevant. No matter where a person is tax resident they are liable for taxes on all Irish rental income to the Irish government. The issue to be considered is if there is other income in the tax year. If going from June to June for example there could be earned income up to June in the first year and eraned income after June in the second year. All income from whatever source within a tax year is aggregated and tax due is calculated accordingly.

Victor

Moved from Accommodation & Property.

RebelGirrrl

There would absolutely no income other than the rent money

antoinolachtnai

Well would it be 15k split over two tax years, or 15k all in one tax year?

RebelGirrrl

Over 2 tax years

Ticktactoe

From what i can gatter, Op is renting out a house to go travelling and wants to know if they are liable to tax on the income which they forcast will be around 15,000.

Basically if your income for the year is 15,000 (rent only) and you did not pick up any work abroad therefore no income then you are only liable for tax on the 15,000. As this is rental income and you have no PAYE employment you would not qualify for the PAYE credit of 1860. Going by standard credits the only credit you would get is your Personal tax credit of 1860.

Therefore 15,000 @ 20% = 3000
Less your personal credit = 1860
Tax due would be = 1140

The above figure is a rough calculation to show how the tax would be calculated. It is only going by standard credits.

Going into residency is complicating the issue. If not resident here then you are resident elsewhere and are obliged to follow tax laws in the country you are then deemed resident.

The above is based on been resident in Ireland.

Contact revenue if you are confused but it is the self assessing section you are directing your query to as you intend on having no PAYE income for the year. You can pm me either

antoinolachtnai

If she is split across two years, then her income would be 7500 in 2009 and 2010 (say) so the tax would be considerably lower, no?

RebelGirrrl

If travelling from place to place though you wouldn't be resident in a country

RebelGirrrl

How bad could this get? How much tax could I actually end up paying?

antoinolachtnai

It will certainly be less than 20 percent, it could be about 10 percent, might even be less - it all depends on how the tax is split across the years and what the tax rates end up being for next year.

But really you're going to have to get some professional advice to be sure.

RebelGirrrl

If you were gone for a few years you'd have to pay though

Jo King

Ticktactoe wrote: »

From what i can gatter, Op is renting out a house to go travelling and wants to know if they are liable to tax on the income which they forcast will be around 15,000.

Basically if your income for the year is 15,000 (rent only) and you did not pick up any work abroad therefore no income then you are only liable for tax on the 15,000. As this is rental income and you have no PAYE employment you would not qualify for the PAYE credit of 1860. Going by standard credits the only credit you would get is your Personal tax credit of 1860.

Therefore 15,000 @ 20% = 3000
Less your personal credit = 1860
Tax due would be = 1140

Do not forget the income levy of 1.67% and the House tax of €200 which applies to rented dwellings. There is also the issue of CGT down the line.

Jo King

antoinolachtnai wrote: »

If she is split across two years, then her income would be 7500 in 2009 and 2010 (say) so the tax would be considerably lower, no?

If there are other earnings in the tax year before going and in the tax year after coming back the tax could be higher.

The_Conductor

Jo King wrote: »

There is also the issue of CGT down the line.

The way things are going- it could well be 20 years before this is an issue

Barracudaincork

The property is situate in the state so tax on its income is returned in this state.

Anyhow you have income of €7500 in both years, you can also deduct expenses such as PRTB registration, 75% of the periods mortgage interest, etc

It will depend how much your mortgage interest is that will determine if any tax is due. Alot of people dont make a profit renting, especially in these times properties are becoming less cash flow positive.

The_Conductor

Barracudaincork wrote: »

The property is situate in the state so tax on its income is returned in this state.

Anyhow you have income of €7500 in both years, you can also deduct expenses such as PRTB registration, 75% of the periods mortgage interest, etc

It will depend how much your mortgage interest is that will determine if any tax is due. Alot of people dont make a profit renting, especially in these times properties are becoming less cash flow positive.

Note: you have to advise your mortgage lender of the fact that the property is not your PPR for the period, you are not entitled to claim TRS and you do have to pay a premium on your mortgage as an investment property.

Ticktactoe

Jo King wrote: »

Do not forget the income levy of 1.67% and the House tax of €200 which applies to rented dwellings. There is also the issue of CGT down the line.

I did say after the calculations "The above figure is a rough calculation to show how the tax would be calculated. It is only going by standard credits."
Cheers tho as i did forget the income levy and im sure more!

Ticktactoe

If the total income is 15000 split over 2 years then income per year is 7500. Going by the current tax rates, bands and credits, you would not be liable for tax on the 7500 per year. However we do not know what the budget at the end of this year will change....

Jo King

smccarrick wrote: »

The way things are going- it could well be 20 years before this is an issue

That depends on when the property was originally bought and when it is eventually sold. If it was bought a long time ago the current value may well be above the original price. On sale there may still be a capital gain even if property declines in value into the future. If for example the property was bought 11 years ago and leased for the next 5 the capital gain would be the difference between the purchase price 12 years ago and the selling price in 5 years time. The final year counts as ppr so 25% of the gain would be chargeable as CGT.

RebelGirrrl

No it'd be 15,000 a year

YFlyer

gurramok wrote: »

If the poster is travelling abroad, they are not resident in the house and do not qualify for the Rent-a-room scheme.
As smccarrick says, will you be more than 183 days a year out of the country for tax purposes?

What happen if somebody from their family lives in one of the rooms for free?

Barracudaincork

RebelGirrrl wrote: »

Over 2 tax years

So what is split over two tax years then???

Give us the date you plan on leaving, the date you plan on coming back and he monthly rent and mortgage interest and then we may be able to help.

Barracudaincork

YFlyer wrote: »

What happen if somebody from their family lives in one of the rooms for free?

From an Income tax or Capital Gains Tax point of view?

RebelGirrrl

Would I be entitled to a personal tax credit?

RebelGirrrl

On the Revenue website it says that if you're non-resident you're still entitled to full tax-credit so long as 75% of your worldwide income in taxable in Ireland which it would be

The_Conductor

RebelGirrrl wrote: »

On the Revenue website it says that if you're non-resident you're still entitled to full tax-credit so long as 75% of your worldwide income in taxable in Ireland which it would be

Correct.

So- you are entitled to the personal tax credit (currently just under 2k).
You would not be entitled to TRS on the mortgage for the period- you could deduct 75% of the mortgage interest from your taxable income however. You would need to inform your lender that it is no longer your PPR for the period, which would entail a mortgage investor weighting. Your house & contents insurance would have to be updated to reflect your non-residence etc.

So- assuming you have 15k of income split over 2 years- thats 7.5k per annum.

Of this- about 5.5k is taxable when all levies etc are factored in- around 25-26%. You are not getting TRS on your mortgage during this period- but you can deduct 75% of the gross interest from rental income as an allowable deduction (I have no idea what your mortgage is- but its entirely possible it may be sufficient to eat up the rest of the tax liability.......)

We can play with figures here until the cows come home- but one way or the other-

1. You will have to make a personal tax return for the 2 years in question
2. You will loose your TRS on your mortgage for the period
3. Its entirely possible there is no tax resultant from the transactions- but you still need to file the paperwork
4. The tenancy will have to be registered with the PRTB
5. The tenant is legally obliged to withold 20% of the gross rent and forward it to the Revenue Commissioners as witholding tax
6. You will probably get the bulk of this back- when you do your annual tax return

I think your original query has been covered by several people here- please correct me if I'm wrong.

RebelGirrrl

Sorry if I confused people, say you were gone for a few years so if you had 15,000 over a tax year from January to January how much would you lose?

censuspro

In a worst case scenario where you had no credits or reliefs etc, the most tax you could pay is €15,000 @ 47%=€7,050

If I was you I would be prudent and wok off that basis or hire a tax consultant. Unless you have specifics we could be speculating here all day.

The_Conductor

censuspro wrote: »

In a worst case scenario where you had no credits or reliefs etc, the most tax you could pay is €15,000 @ 47%=€7,050

If I was you I would be prudent and wok off that basis or hire a tax consultant. Unless you have specifics we could be speculating here all day.

Not so.

Worst case scenario-

Annual Income = 15k

Less tax free allowance 1860 = 13,140 = taxable income

Less allowable deductions:

PRTB registration fees + all fees for letting agency = 1,140

Reckonable income for tax purposes @ 12k

Tax @ 20% + 1.75% income levy + other probable levies (for argument sake round this up to 25%- its an overestimation- but its better to over estimate than it is to underestimate) = 3k

So you have a net aftertax income of around 12k from which agency fees, registration fees etc would have to be found.

Very worst case scenario you are still up roughly 1,000 a month after tax.

RebelGirrrl

But I would have to have a credit of at least 1830 though, right? How did you get 47? 15,000 - 20%= 12000 plus 1830= 13380 13380-20%(non-residency tax) 1074. How could it get any worse than this?

RebelGirrrl

smccarrick wrote: »

Not so.

Worst case scenario-

Annual Income = 15k

Less tax free allowance 1860 = 13,140 = taxable income

Less allowable deductions:

PRTB registration fees + all fees for letting agency = 1,140


That 15,000 is after the 8% fee plus 21% VAT that the Agency charges

The_Conductor

Sorry- your original post read 15k rental income....... I read this as Gross Income- not net.

The 47% is the higher tax rate- ignore it- you are well under the threshold.

What is your gross annual income- that is the knux of the problem.

Agency fees with VAT etc are normal. You say the agency fees are 8% of the gross rental income + VAT (for arguments sake call it 10%). Can you confirm this. Note: the agency do not charge VAT to the tenant- they are a collection agency acting on your behalf- providing a service to you- not the tenant. The rental income they collect for you is a gross rental income- which you have not clarified what the annual total comes to.

Clarify the total income- the agreement you have with agency and come back here and we'll look at it again.

S.

censuspro

smccarrick wrote: »

Not so.

Worst case scenario-

Annual Income = 15k

Less tax free allowance 1860 = 13,140 = taxable income

Less allowable deductions:

PRTB registration fees + all fees for letting agency = 1,140

Reckonable income for tax purposes @ 12k

Tax @ 20% + 1.75% income levy + other probable levies (for argument sake round this up to 25%- its an overestimation- but its better to over estimate than it is to underestimate) = 3k

So you have a net aftertax income of around 12k from which agency fees, registration fees etc would have to be found.

Very worst case scenario you are still up roughly 1,000 a month after tax.

If you read my post I said no credits and no reliefs. That means €15K all at the marginal rate. So my original post was correct.

RebelGirrrl

15,000 is what I would be left with after the monthly Agency fees + the VAT on that are taken out

censuspro

Well whatever your net income is multiply it by 47% and thats the most tax you could pay. That could be reduced by credits and reliefs and depending on you total income and personal circumstances.

You wont get a definitive answer on this forum, I suggest you hire a registered tax consultant.

The_Conductor

RebelGirrrl wrote: »

15,000 is what I would be left with after the monthly Agency fees + the VAT on that are taken out

Do the agency fees include tenancy registration with the PRTB and a vacancy allowance? In the current climate a 15-20% vacancy allowance is not unusual.
Also- are the agency aware that you are non-resident and are they deducting witholding tax (as they should be doing)?

Assuming no tax is being witheld- and all fees etc are covered prior to your 15k income- you have a taxable income of 13,140 and tax liabilities of just under 25% of this (taking into account the income levy and any changes in the bands that may occur). Lets overestimate this and guess that the total tax due is approx 3,500- this leaves you with a net of 11,500.

There are a hell of a lot of assumptions being made by both me and other people- I have no idea how valid many of them are.

The biggest worry I would have and the biggest issue which might seriously affect your calculations- is 1. Periods of vacancy- in the residential market these are increasing significantly at the moment and 2. Rental income itself- its falling significantly at the moment- the rental market is saturated and with greater number of people emmigrating- this is likely to get worse.

In short- assume a net income of around EUR11,500- however its entirely possible that it may be significantly lower than this- there are too many unknowns- and some of the unknowns are totally outside of anyone's control.........

Ps- you will also need someone to do an annual tax return for you while abroad- factor a couple of hundred into the equation for this too........

RebelGirrrl

Thanks for all your help, I'd still appreciate anyone else's thoughts

Barracudaincork

Get professional advice, you arent giving the full story here, you keep repeating yourself, yet not answering questions, the rates and sums above i believe are wrong based on the info you have provided, so get professional advice!

namenotavailablE

Basic calculation is along following lines:

Net income in calendar year Net income in calendar year

*

XXXXX

Income tax at 20%

**

XXXX

Less:
Personal tax credit

(1860)

Net tax due

XXX

Add:
Income levy

***

XX

PRSI/Health

****

XX

Total tax + levies

XX

*: Assuming this value is after ALL deductible expenses eg interest, PRTB fee, agency fees etc
**: Assuming that the net income is c €15000 per annum
***: This is probably 1% but am unsure about this; percentage is of the topline value in above table

****: I think this is 5% of rental income but am unsure.