Advice on renting out apartment needed

Roro4Brit

So me and my partner have a 2 bed apartment. When we bought it 3 years ago my OH worked 2 minutes from here and I worked a 10 min dart ride away so it was perfect.

We still love the apartment itself, but since then a lot has changed and we not both work in CC. So we're now thinking of renting this place out, and renting ourselves in city centre.

Now our rental intake will not cover our mortgage, it will be about €400 short, but that's ok. What we're planning to do is rent somewhere in CC for the same value that we can rent this place out at, currently between €1100-€1200, and then we just continue to pay our mortgage as normal.

I'm just wondering if anyone can explain how tax will work on this? I know rental income is taxed, with the allowance of many deductions such as maintainence, loss of tax, interest etc. So in our case, does the fact that we will be getting less income than we pay out on our mortgage mean we will be exempt from tax on the rental income?

Thanks

Victor

You would be well advised to talk to an accountant as there are many parameters.

The_Conductor

Renting out your own property is wholly a seperate transaction from renting somewhere for yourself to live in.

You are entitled to rent relief on the property you propose to live in for you and your partner. This is the extent of your automatic entitlements in respect of the property you are renting.

The property you own- ceases to be your Principle Private Residence. You no longer qualify for Mortgage Interest Relief (however 75% of the mortgage interest is a deductable allowance before calculation of tax). Any furniture or fittings may be depreciated on a flatline basis, 20% per annum (from date of original purchase, supported by appropriate documentation)- also as an allowable deductable expense before calculation of tax due. Management Charges, PRTB registration fees, BER rating fees etc- are all allowable expenses.

Once you deduct all allowable expenses from the gross rental income- the net remainder is wholly assessed as taxable income, along with any other income from any other sources you may have.

Whether the rental income covers your mortgage or not- is wholly irrelevant, and does not enter the picture. Nor does the amount you are paying to rent another property matter (other than you can claim a credit for rent-relief- but this is minimal in nature).

Unfortunately there is no scheme in Irish tax law to allow a homeowner offset the rental income of their current PPR against the rental cost of an alternate more suitable accommodation. There is a lot of merit in suggesting such a scheme- though in the current cash straightened times, I'm not sure whether a scheme like this might come to pass- but it does make a hell of a lot of sense.......

Roro4Brit

Hey smccarrick, thanks for the great response, it is more detailed and easier understood than anything I could find on those gov websites.

I didn't realise it was so complicated, it now seems like a lot of work and not as financially viable as I originally thought. It's a pity but hey, we could be a hell of a lot worse off like a lot of other people in this country at the mo. Count yur blessings eh!

Thanks again!

stepbar

I think I'd be inclined to stay where you are. You probably end up paying the Non PPR tax (200 eur) and the expenses smccarrick pointed out. Now as you won't be making a profit on the transaction - I'd be guessing from what you said here (after deductions etc), it wouldn't be worth your while.

tedstriker

It's also worth noting that rental prices have dropped a lot over the last 2 years and the gulf between rental income and mortgage would be a growing gap over the next few years.

http://www.statusireland.com/statistics/property/29/Daft.ie-Rental-Price-Index.html