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Rental Tax Returns - now non-resident ... so confused
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12-01-2010 8:50pm#1Hi.
I would be really grateful if someone could help me out with the following issue i have. I have read a lot about this but everything i read just throws up new questions and i need it to be clear and simple.
I own an apartment in Ireland with my wife since June 2006. We moved out and rented it in June 2009 (so i checked and the stamp duty clawback doesnt apply thankfully). We left ireland also in June 2009.
So when are we non-resident? It seems to me you have to let a year go by before non-residency can be determined as you have to be out 183 days in a year. Is that in a tax year or in a year from when left?
We could have ended up going back after a few months (we left not knowing when or if we would return) so by just leaving you cant really be immediately declared non-resident. I assume if it applies by tax year then we are now non-resident for 2010.
So the tenant has been paying rent (100%) as normal to my irish bank account using my irish address that has always been associated with my PPS number. Only family and friends are aware of us not being in the country. Everything is basically like we were there.
I now have to do a tax return on the rental income I suppose.
This is throwing up some questions i cant find clear answers on.
Can the furniture we had in the apartment when we rented it be used as a depreciation expense (our original furniture and new bed we bought for it when renting)? Or does it all have to be purchased after the tenant moved in (in relation to pre-letting costs)? - this would seem crazy as all apartments then would be shown empty and with a promise of installing furniture if they sign the lease.
What is the tax rate for calculating tax? Is it a flat 41% regardless or is it based on income and where is this income meant to be (ireland or foreign country)?
I know now i have to get the tenant to withhold 20% and pay revenue each month and tenant gives me a R185 at the end of the year or I get a family member as agent to collect 100% from tenant, they give me 100% and they pay 20% to revenue in their tax return. Then i give them back 20% to cover that cost of this tax as it seems they are not allowed to withhold the 20% when passing the money to me.
So if i went the tenant route, on my tax return is the rental income the 80% figure or the 100% figure (which i dont get)? And is the 20% then subtracted from the calculated tax in the tax return?
Or if i went with the family member as an agent, do they then have to do a tax return and I do not have to do one? Or how does this work?
Can the BER cert be added as an expense or is this a pre-letting costs that cant be added?
As it was rented out in mid year I presume everything should be broken down by exact number of days (management fees, insurance, wear and tear depreciation etc.)
If i change it so payment will be made to my agents account do I need to just ring the PTRB people to tell them this or do I have to do anything?
Do you know of a clear example of the line items that need to be filled out on the tax return (for a non-resident landlord)? I couldnt find anything like that on the internet.
Surely there are thousands who have gone through this and have left during part of a year.
Either way I am at a big loss each month and having to pay extra tax is even worse.
If someone was getting nearly what they pay in the mortgage (excluding managements fees and other costs etc) each month from rent would you expect to come out even or how much of a loss would you generally expect? How much rent above the mortgage cost would generally mean breaking even (excluding other variable expenses)?
If i end up making a loss with no tax to pay, where can that loss be accounted for in the calculations for the next years return?
Generally does anyone end up paying tax when they have the 20% withheld and is it generally mean a big loss?
I would really appreciate some clear help and advice on this.
Then Ill have to turn to looking into the thousand times worse US tax returns.0
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Hi.
I would be really grateful if someone could help me out with the following issue i have. I have read a lot about this but everything i read just throws up new questions and i need it to be clear and simple.I own an apartment in Ireland with my wife since June 2006. We moved out and rented it in June 2009 (so i checked and the stamp duty clawback doesnt apply thankfully). We left ireland also in June 2009.
Stamp duty clawback may not apply- however you have to declare that the property is no longer your Principle Private Residence to the bank. Your mortgage is then considered to be an investor mortgage (normally with higher interest charges) and you do not qualify for TRS (however you can claim 75% of the interest (for 2009) as an allowable expense when deducting costs before determination of taxable income).So when are we non-resident? It seems to me you have to let a year go by before non-residency can be determined as you have to be out 183 days in a year. Is that in a tax year or in a year from when left?
If you spent 183 days or more in Ireland in 2009 or an aggregate of 280 days or more in Ireland between 2008 and 2009, you will be regarded as tax resident for those tax years. For 2010- if you spend over an aggregate of 280 days in Ireland between 2009 and 2010- you continue to be tax resident. It makes a lot of sense to sit down and make sure you keep under the 280 day limit. Note- the midnight rule no longer applies.We could have ended up going back after a few months (we left not knowing when or if we would return) so by just leaving you cant really be immediately declared non-resident. I assume if it applies by tax year then we are now non-resident for 2010.
No- do not assume this. Go by the 280 day calculation I detailed above.So the tenant has been paying rent (100%) as normal to my irish bank account using my irish address that has always been associated with my PPS number. Only family and friends are aware of us not being in the country. Everything is basically like we were there.
I now have to do a tax return on the rental income I suppose.
This is throwing up some questions i cant find clear answers on.
If you are tax resident (you are for 2009)- do a regular tax return, declare the income, pay the taxes etc. For 2010- if you are no longer tax resident- you pay Irish tax on Irish sourced income less any witholding tax the person renting the unit, or the agent will have paid.Can the furniture we had in the apartment when we rented it be used as a depreciation expense (our original furniture and new bed we bought for it when renting)? Or does it all have to be purchased after the tenant moved in (in relation to pre-letting costs)? - this would seem crazy as all apartments then would be shown empty and with a promise of installing furniture if they sign the lease.
Its depreciated on a flatline basis. If you want to deduct the cost of the furniture and fittings- you supply the receipts for the furniture- and its depreciated on a flatline basis from date of purchase. If you bought it a year before letting the apartment- you loose 20% of the original price- and depreciate the remainder 80% over the following 4 years. (I.e. depreciation is on a flatline basis, 20% per annum, over a 5 year period).
Periods of vacancy are irrelevant- its a flatline depreciation- however you can only use that portion incurred while occuppied as an allowable expense.What is the tax rate for calculating tax? Is it a flat 41% regardless or is it based on income and where is this income meant to be (ireland or foreign country)?
There is a special form to be completed for non-resident landlords: here
Legally unless you have an agent- the tenant deducts tax at the marginal rate from the gross rent, and pays it over to the Revenue Commissioners on a monthly basis. At the end of the year- they furnish a statement from the Revenue Commissioners to the landlord- and this can be used to issue a balancing statement to the Landlord.
If an agent is used- the agent has to set up a new PPS number for receiving the landlords rental income- and gets the credits that would normally have accrued to the landlord- were they resident in Ireland. Taxes are paid from the gross rental income after the normal allowable deductions, before the balance is remitted abroad.I know now i have to get the tenant to withhold 20% and pay revenue each month and tenant gives me a R185 at the end of the year or I get a family member as agent to collect 100% from tenant, they give me 100% and they pay 20% to revenue in their tax return. Then i give them back 20% to cover that cost of this tax as it seems they are not allowed to withhold the 20% when passing the money to me.
The agent *does not* simply hand over 100% of the rental income to you. You are liable to pay 41% tax + other taxes on any rental income (less allowable deductions). The 20% witholding tax a tenant pays to Revenue- is simply a portion of this tax. If you do not have a large amount of allowable deductions- you may have a significant tax bill on top of the 20% already paid.So if i went the tenant route, on my tax return is the rental income the 80% figure or the 100% figure (which i dont get)? And is the 20% then subtracted from the calculated tax in the tax return? Or if i went with the family member as an agent, do they then have to do a tax return and I do not have to do one? Or how does this work?
You calculate the total tax due- after taking any allowable deductions into account. You have your balancing statement from your tenant. You compare the total tax due- to the amount already paid by the tenant- and forward the difference along with the certificate to the revenue commissioners.Can the BER cert be added as an expense or is this a pre-letting costs that cant be added?
A BER cert is an allowable expense.As it was rented out in mid year I presume everything should be broken down by exact number of days (management fees, insurance, wear and tear depreciation etc.)
All costs incurred are your costs and not allowable as deductable expenses against rental income- other than for the period the unit is ocuppied. If it is ocuppied for 6 months- you gain 1/2 year allowable deductions (Management Fees/insurance/20% depreciation of furniture and fittings etc)If i change it so payment will be made to my agents account do I need to just ring the PTRB people to tell them this or do I have to do anything?
The Agent has to set up a new PPS number to handle the rental income. It is assigned any credits that would normally have accrued to you as an Irish tax resident- were you tax resident here- and has the usual obligations associated with a non-PAYE tax payer.Do you know of a clear example of the line items that need to be filled out on the tax return (for a non-resident landlord)? I couldnt find anything like that on the internet.
Not quite sure what you mean by 'line items'.
You need to complete a full Irish tax return. It can be done online- but if you've never done one before I'd seriously advise getting a reputable firm of accountants to do it for you.Surely there are thousands who have gone through this and have left during part of a year.
Either way I am at a big loss each month and having to pay extra tax is even worse.If someone was getting nearly what they pay in the mortgage (excluding managements fees and other costs etc) each month from rent would you expect to come out even or how much of a loss would you generally expect? How much rent above the mortgage cost would generally mean breaking even (excluding other variable expenses)?
You pay tax at 41% on all rental income. 75% of the mortgage interest is an allowable expense- the other 25% is not. If you're only meeting mortgage payments- totally ignoring other costs- you have a large deficit.
A simple example:
I earn EUR100 rental income.
I pay EUR100 mortgage.
My tax bill is EUR41
However- I have EUR75 of allowable expenses
So- I owe 41% of EUR25- i.e. a tax bill of EUR10.25
You can add in other allowable deductions into the above equation- its only a very simple example, but you get the picture?If i end up making a loss with no tax to pay, where can that loss be accounted for in the calculations for the next years return? Generally does anyone end up paying tax when they have the 20% withheld and is it generally mean a big loss?
Even in the current climate I've paid income tax on rental income consistently for several years running. Just because you make a loss- does not mean you do not have tax to pay....... Whether the 20% witholding tax is sufficient or not- depends entirely on your allowable deductions- if you've a large mortgage- the interest component of deductions should be massive (but note- you are not entitled to TRS- and if you do claim it, or forget to stop claiming it- you are commiting tax fraud).I would really appreciate some clear help and advice on this.
Then Ill have to turn to looking into the thousand times worse US tax returns.
Hope I've helped.0 -
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