Buying a New Home Tax on old one

Eircom_Sucks

me and my partner are looking to buy a new house , and renting my own house out and renting her place out as its not a good time to sell

were both legally single

how much tax roughly would we pay on each house per year

Atlantic Dawn

You will pay on the gain made after expenses are covered, all you need to know here...

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

Eircom_Sucks

Atlantic Dawn wrote: »

You will pay on the gain made after expenses are covered, all you need to know here...

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

just looking for a simple answer , just a rough idea

thanks alot though

kennyb3

Eircom_Sucks wrote: »

me and my partner are looking to buy a new house , and renting my own house out and renting her place out as its not a good time to sell

were both legally single

how much tax roughly would we pay on each house per year

You' ll pay tax on each house on the surplus of rental income over expenditure (repairs, mortgage interest etc).

The tax will either be at approx 25% (if gross earnings are under €36,400) or approx 50% if over this. They are rough rates.

But be careful we are seeing alot of big surpluses for 2 reasons - falling interest rates (altho now gone back up slightly) and therefore interest amounts and also only 75% of interest now being allowed.

Note:

If the mortgage repayments are only the same as the rent being received you will be making a loss in monetary terms (as you ll have other expenses and a tax bill) but you can still have a rental surplus (as capital element of repaymnts not taken account of in rental tax comp)

Brian

kennyb3

On another non tax note though, you would be absolutely mad to do this (and its unlikely the banks will let you anyway). What i mean is you have to think of all likelihoods and make sure your not risking/gambling everything, e.g:

- what would you do if one of the houses had no tenant for an extended period, could you manage? or both had none for a short period - how would you make teh mortgage repayments on all 3 houses?

- Seperately or combine with the above what if one of you lost your job? or even both?

Given the current economic situation you should be looking to reduce your borrowings not increase them. why would you want 3 mortgages, 2 of which are reliant upon tenants income?

Im not sure what your situation is re negative equity, but houses prices aint going back up for circa 10+ years, so id be selling out of one house and living in the others, or if not in negative equity out of both and buying a house jointly. (but again here you wont be a first time buyer and you ll get mauled with stamp duty)

Eircom_Sucks

kennyb3 wrote: »

On another non tax note though, you would be absolutely mad to do this (and its unlikely the banks will let you anyway). What i mean is you have to think of all likelihoods and make sure your not risking/gambling everything, e.g:

- what would you do if one of the houses had no tenant for an extended period, could you manage? or both had none for a short period - how would you make teh mortgage repayments on all 3 houses?

- Seperately or combine with the above what if one of you lost your job? or even both?

Given the current economic situation you should be looking to reduce your borrowings not increase them. why would you want 3 mortgages, 2 of which are reliant upon tenants income?

Im not sure what your situation is re negative equity, but houses prices aint going back up for circa 10+ years, so id be selling out of one house and living in the others, or if not in negative equity out of both and buying a house jointly. (but again here you wont be a first time buyer and you ll get mauled with stamp duty)

brian you'd think id know all this working in accounts myself

if we'd rent the houses out it would be on longterm leases to the social so a gauranteed income albeit slightly lower than market value

both houses are in negative equity ( as isnt everbody ) so it wouldnt make sense to sell now , mortage on my place now is €1100 a month for 4 bed , the social said they'd pay me €1075 a month over 5 years , so if i fixed my mortgage for 5 years id be paying €1236 so overall id be be forking out €150 a month which isnt bad and id get to keep my home

now the gf is in the same boat mortgage of around 1100 on a 2 bed apartment in swords , was offered €900 by social so thats a €200 a month extra for her but in fairness she earns over €80k so not gonna hurt that much

so we'd together be paying €350 out of our own pockets , so we just needed to see how much roughly the tax we'd pay

we'd ideally sell the houses after 5 years when hopefully ( longshot ) they'd be in positive equity

kennyb3

Okay well first major problem i see that if she is on €80k plus, she will be paying tax on the surplus of rent @ 50%

€900 * 12 = €10,800 (rent)

Less whatever the interest only part of the mortgage (find this out exactly).

But I cant see it being huge at the moment and thus she will likely have a decent surplus - so your prob looking at paying 4k tax at a guess.

Thats €333.33 per month, plus the €200 she is losing out on - now your paying €533.33 per month extra on this house before NPPR and other property charges ( i wouldnt think the social will cover these).

To cut a long story short the goverment are heavily heavily penalising people with an investment property and thus you d really want to be able to afford the mortgage on the two homes (or three really) out of your own pay packets excluding the rents.

You ll make very very little net to contribute towards the mortgage.

NB - This is before i even throw in the real bombshell - rising interest rates!! Okay so the gap is only €150 for you and €200 for her (€350 per month each before taxes and charges - still massive) but if and when interest rates go up further this gap will only get bigger and you ll likely get into serious trouble.

I CANNOT STRESS DONT DO IT ENOUGH - THIS IS EXACTLY WHAT GOT OTHERS INTO A SERIOUS MESS.

Honestly your jepordising your whole life and will cripple yourself with death.

However if you wont listen, find a good accountant and do some very very in depth what if analysis

- affect of interest rates
- how they would affect your calcs to come out of negative equity


Oh and did i mention rising taxes, falling house prices (you wont get out of negative equity as fast as you might think).

Sell one of the places, take the hit - split it, pay off as much as you can on one remaining property and start again. if you get mortgage down on one significantly then in 5 years or so look to upgrade.

What your talking of doing is what got this country into this mess, its suicide.

Mr. Incognito

Property thread.

Closed as per charter instructions.

I've been busy these week helping people out with part three exams but seriously people, I really shouldn't have to be locking these threads.

Take it elsewhere.