Letting my house

eobphotography

I am letting my house to move in with my boyfriend. I have a tenant and the rent just about covers the mortgage but falls short when I loose my TRS. I also will be paying more rent in my new house than I was paying for my mortage plus will have higher travel expenses as I will have to commute (the things we do for love!)
My questions are will I have to still pay tax on the rent even thought I am quiet significantly out of pocket, do I have to inform my lender? will my home insurance go up when I let the house ( I assume I have to inform my insurer?)
What other legal and tax issues should i be aware of?
It seems very unfair that people are being forced to let houses they would prefer to sell but cannot, and are further penalised.

NIMAN

Your rent is seen as taxable income, and you will have to pay tax on it I'm afraid (minus allowable deductions), whether or not it covers your mortgage or not.

eobphotography

NIMAN wrote: »

Your rent is seen as taxable income, and you will have to pay tax on it I'm afraid (minus allowable deductions), whether or not it covers your mortgage or not.

so unfair considering so many people who would prefer to sell but cant and have no choice but to rent. I can see this as being valid if the rent is for a second property but why is the rule the same for someone who only owns one house as for a property investor who owns many? another inequality in this messed up country.

Ddad

Your insurance wil increase. In addition your lender will increase the mortgage rate if they get wind of you letting the house. You are effectively stepping away from a non commercial footing to a commercial one. If it was me (and it was once upon a time in the same position) I would talk to an accountant and a solicitor to get the full picture. I'm also assuming that the PRTB are involved in the leasing arrangements.

There will alos be a capital gains implication on the sale of the house should you decide to sell.

I'm afraid it's quite a while since I was in your position so I can't offer more nuanced advice. Best of luck with it.

eobphotography

Ddad wrote: »

Your insurance wil increase. In addition your lender will increase the mortgage rate if they get wind of you letting the house. You are effectively stepping away from a non commercial footing to a commercial one. If it was me (and it was once upon a time in the same position) I would talk to an accountant and a solicitor to get the full picture. I'm also assuming that the PRTB are involved in the leasing arrangements.

There will alos be a capital gains implication on the sale of the house should you decide to sell.

I'm afraid it's quite a while since I was in your position so I can't offer more nuanced advice. Best of luck with it.

thanks for the gloomy news! Am i obliged to inform the lender? insurance PRTB etc? is it risky not to?

D3PO

eobphotography wrote: »

so unfair considering so many people who would prefer to sell but cant and have no choice but to rent. I can see this as being valid if the rent is for a second property but why is the rule the same for someone who only owns one house as for a property investor who owns many? another inequality in this messed up country.

you have a choice. your not forced to move in with your boyfriend. The system is perfectly fair. weather you rent one or one hundred properties it should be the same.

why should you not have to pay tax on rental income ? Jesus if that was the case everybody who wanted an investment proiperty would buy two houses before getting married to take up that loophole. :rolleyes::rolleyes:

Your perception is as messed up as you think this country is.

eobphotography

D3PO wrote: »

you have a choice. your not forced to move in with your boyfriend. The system is perfectly fair. weather you rent one or one hundred properties it should be the same.

why should you not have to pay tax on rental income ? Jesus if that was the case everybody who wanted an investment proiperty would buy two houses before getting married to take up that loophole. :rolleyes::rolleyes:

Your perception is as messed up as you think this country is.

But I dont own two properties, if I had a choice I would sell my house for what I paid for it and buy another, I dont have that choice like most Im in negative equatiy. I am renting with my boyfriend because we want to make a life together and have a family, I'm not making any income on the rent, it doesnt even cover the mortgage. If I could sell my house we would probably buy a place together, but one property in negative equity is enough for any couple. so for now we are forced to rent and I am paying higher rent and higher tax just for the privilege of moving to another town, wheres the fairness there?

winterlight

I'm pretty sure that when you do rent it out you can write off the interest of your mortgage, along with any other expenses, against any rental income. So you won't pay much tax at all. You mightn't even pay any.

convert

I don't mean to pry, but is there any reason why your OH can't move to your house?

By moving to his, not only will have increased financial output from travel costs, but you'll also be paying a mortgage and rent. It seems an awful lot to be paying rent for somewhere you don't own, while you're not covering the costs when renting out a house you do own.

digzy

Dunno who you're renting out to-private or the rent-relief crowd, but you are allowed earn up to 10k p/a 'renting rooms' in your house tax free to private clients.

If i was you i'd get private clients-professionals. they can still get tax relief on rent they pay you.keep bills in your name. fcuk the bank re the situation, you'd be crazy to tell them and they wont be finding out either. i'd forget telling the insurance too just in case.

you cant register with ptrb either but if you're straight with tenants and give receipts i dont see why they'd need it. on the other hand if you take on a nightmare client the situation gets v messy.

if you're not self employed i'd chance it, but you'd need to cover your ass.

eobphotography

convert wrote: »

I don't mean to pry, but is there any reason why your OH can't move to your house?

By moving to his, not only will have increased financial output from travel costs, but you'll also be paying a mortgage and rent. It seems an awful lot to be paying rent for somewhere you don't own, while you're not covering the costs when renting out a house you do own.

I know that would be the sensible thing! but I will be commuting for an hour against rush hour traffic, with the possibility of getting a job more likely in dublin, for him to commute from here would take him 2 hours, with no possibility of a job here realisticaly in the near future, so for quality of life it makes sense for me to move. the rent just about covers the mortgage, but with no TRS and increased insurance and possibility of interest increase if i tell the bank it definatly wont cover it. therein lies my dilema!

eobphotography

digzy wrote: »

Dunno who you're renting out to-private or the rent-relief crowd, but you are allowed earn up to 10k p/a 'renting rooms' in your house tax free to private clients.

If i was you i'd get private clients-professionals. they can still get tax relief on rent they pay you.keep bills in your name. fcuk the bank re the situation, you'd be crazy to tell them and they wont be finding out either. i'd forget telling the insurance too just in case.

you cant register with ptrb either but if you're straight with tenants and give receipts i dont see why they'd need it. on the other hand if you take on a nightmare client the situation gets v messy.

if you're not self employed i'd chance it, but you'd need to cover your ass.

Thats just what i needed to hear! thanks

convert

digzy wrote: »

Dunno who you're renting out to-private or the rent-relief crowd, but you are allowed earn up to 10k p/a 'renting rooms' in your house tax free to private clients.

If i was you i'd get private clients-professionals. they can still get tax relief on rent they pay you.keep bills in your name. fcuk the bank re the situation, you'd be crazy to tell them and they wont be finding out either. i'd forget telling the insurance too just in case.

you cant register with ptrb either but if you're straight with tenants and give receipts i dont see why they'd need it. on the other hand if you take on a nightmare client the situation gets v messy.

if you're not self employed i'd chance it, but you'd need to cover your ass.

eobphotography wrote: »

Thats just what i needed to hear! thanks

So basically you wanted somebody to tell you that it's ok not to do things by the book and that it's worth taking the risk of not declaring your income, registering with the PRTB, or basically do anything that a landlord and home owner should when they're renting out their house?!

What happens if your tenants want to claim rent relief?

What happens if there's an issue with the house and you need to claim through the insurance and they discover that you had actually rented the property? They might not pay out.

What happens if there's a dispute between you and your tenants and they go to the PRTB? You'll have to pay a fine for not being registered. Moreover, a very disgruntled tenant may often report you to revenue (it's been mentioned on this forum quite a few times).

What about issues with your mortgage provider?

These are only the most obvious scenarios which have come to my mind, but there's lots of others. Are you realling willing to take all those risks, OP? Do you really think that it's woth it? Given the economic situation in this country, I would suspect that it won't be long before revenue look into this type of thing and come down heavily on those who have been, errmm, not doing things by the book.

Best of luck with whatever you decide to do!

eobphotography

convert wrote: »

So basically you wanted somebody to tell you that it's ok not to do things by the book and that it's worth taking the risk of not declaring your income, registering with the PRTB, or basically do anything that a landlord and home owner should when they're renting out their house?!

What happens if your tenants want to claim rent relief?

What happens if there's an issue with the house and you need to claim through the insurance and they discover that you had actually rented the property? They might not pay out.

What happens if there's a dispute between you and your tenants and they go to the PRTB? You'll have to pay a fine for not being registered. Moreover, a very disgruntled tenant may often report you to revenue (it's been mentioned on this forum quite a few times).

What about issues with your mortgage provider?

These are only the most obvious scenarios which have come to my mind, but there's lots of others. Are you realling willing to take all those risks, OP? Do you really think that it's woth it? Given the economic situation in this country, I would suspect that it won't be long before revenue look into this type of thing and come down heavily on those who have been, errmm, not doing things by the book.

Best of luck with whatever you decide to do!

It seems if a civilian bends the rules at all (not to make profit but to merely live without going under) they are judged very harshly by their neighbors, yet the state and the banks do it at the expense of the civilian everyone basically accepts it.

Anyway I haven't made any decision yet I came on here to get some advise, and it was good to hear both sides of the coin.

athtrasna

OP you are not alone in this situation but this does not give you the right to defraud the state by not declaring and paying tax on your rental income. You also will have to pay the €200 per year NPPR (as it would not be your primary residence) and register the tenancy with the PRTB and pay associated fees.

The advice you were given about renting a room is wrong. You still have to file a tax return for a rent a room scheme even though no tax is payable for rent a room income up to 10k (total income including payments for bills). This only applies where the landlord is resident, which you would not be.

Sadly the powers that be tend to be more dedicated to investigating the small guy, councils are pretty good at auditing properties liable for the NPPR and Revenue have publicly declared that they are intensifying investigations of undeclared rental income. The repercussions of this are huge.

If you have to move in with your boyfriend, and he can't move to you, then if you don't do things by the book you are leaving yourself open to a whole load of nightmare scenarios, Convert has identified some of them...and there are worse!

odds_on

A little confusing about the PRTB.

If you live in your house and rent out a room or two, you don't register with the PRTB.

If you rent out individual bedrooms with individual lease agreements and the tenants share common facilities (e.g. kitchen, bathroom etc.) you don't register with the PRTB.

If you don't live in the house and rent it out as a one complete unit, you must register with the PRTB.

D3PO

eobphotography wrote: »

I'm not making any income on the rent, it doesnt even cover the mortgage. ?

this is why landlords have a bad name becasue there are so many that dont have a concept of how the profession works.

You pay taxx on the income. Rent is income. Weather you cover your mortgage or not is irrelevent.

If I earn 100 euro a day and pay 110 euro in petrol to drive to work and a tenner for your lunch and so on. I still earn 100 euro in income thats taxable.

Making a profit has no bearing at all.

dearg lady

OP, you would pay tax on your rental income less allowable expenses, 75% mortgage interest is one such expense. Look at the revenue website for guidelines on rental expenses.

What MIGHT be more beneficial would be to rent out rooms but stay living there, you could still spend a lot of time in your boyfriends house. Yeah, I know it's annoying lugging stuff between 2 houses, but do the sums on this versus renting out the full property and see which works out best.

Victor

digzy wrote: »

Dunno who you're renting out to-private or the rent-relief crowd, but you are allowed earn up to 10k p/a 'renting rooms' in your house tax free to private clients.

If i was you i'd get private clients-professionals. they can still get tax relief on rent they pay you.keep bills in your name. fcuk the bank re the situation, you'd be crazy to tell them and they wont be finding out either. i'd forget telling the insurance too just in case.

you cant register with ptrb either but if you're straight with tenants and give receipts i dont see why they'd need it. on the other hand if you take on a nightmare client the situation gets v messy.

if you're not self employed i'd chance it, but you'd need to cover your ass.

I can't say that anything that you have suggested is the right way to go about things. You have a certain way of saying things that are likely to get people in trouble, when they could quite legitimately do something similar and not get in trouble.

OP, either:
1. Stay where you are and possibly get lodgers to help cover the cost of travel, etc. and spend a few days per week with the other half. Up to €10,000 is tax free, after that, you pay tax on all of it. Keep your TRS.
2. Rent out rooms or the whole property. Tell the bank, you insurer, the PRTB and the Revenue. Depending on what stage you are at with your mortgage, the expenses will off-set a lot of costs. In any case, you will have somebody else paying for most of the mortgage on the property you own.

eobphotography wrote: »

It seems if a civilian bends the rules at all (not to make profit but to merely live without going under) they are judged very harshly by their neighbors, yet the state and the banks do it at the expense of the civilian everyone basically accepts it.

And surely we hold ourselves out to be better than the 'bad people'.

Ddad

So to sum up two schools of thought on this thread.

Arra shure, chance it and you'll probably get away with it, shure don't the big fellas do it all the time; shure, that's how they got big!

or

Play it by the book because if you don't sooner or later trouble is ging to come knocking in the form of the revenue/ refused insurance claim/ dastardly tenants.

When I was a landlord (ah what halcyon days) I played it by the book so I could sleep at night. I'm not in the "it'll be grand" school of thought. Back then the rent actually covered the mortgage and more. After two years of renting and declaring profits we made a .....wait for it....£300 profit. Then we paid a whack of our final sale price, can't recall how much on capital gains to the state.

So we didn't make a bob but walked away as clean as a whistle.

If you rent and don't declare it it'll eventually bite you in the bum. If you don't adequately insure your property which you are in hock up to your ears for and it burns down; well you can fill in the blanks.

I think the advise on the rent a room is good. It gives you a basis to move forward in your personal life without betting the house on it...see what I did there:)

I really do wish you the best of luck but think logically. Imagine some of the scenarios that could arise if you wing it and imagine having to cope.

digzy

of course what i said was well off the mark legally. I was totally illegal but while i dont do it myself i know loads that do.they bought in the boom with a view to trading up. Now they've moved in with partners in totally different areas. I dont blame them given that it's the silent majority in the middle who get caught paying for the fat cats at the top of the tree and all the lads at the opposite end.

There's a number of variables re tenants. if you rent out rooms to different people, give them any receipts they need and you file a return. who's to say where you sleep at night. dont think the revenue are gonna be looking at your bed.

however if you've a family renting it, it'd be harder to explain.

you can do a 'risk assessment' so to speak. is it worth it? we all have different opinions so therefore would act differently.

To sum up if you want to do things by the book.
1 Rent out the rooms to private clients
2 keep the smallest room locked-thats your bedroom. therefore you can
do spot checks and can show the revenue if they call-never happen!
3 file a return with revenue
4 inform your insurance you're renting rooms and that you live there

And move on with your life knowing you've eased the mortgage burden even if you're fcuk'd like the rest of us in negative equity:D

athtrasna

digzy wrote: »

To sum up if you want to do things by the book.
1 Rent out the rooms to private clients
2 keep the smallest room locked-thats your bedroom. therefore you can
do spot checks and can show the revenue if they call-never happen!
3 file a return with revenue
4 inform your insurance you're renting rooms and that you live there

Surely the bolded sections contradict each other. Lying and saying to the insurance company (and also Revenue) is not doing things by the book.

digzy

true. i should have said 'to make things stack up'

mdebets

digzy wrote: »

There's a number of variables re tenants. if you rent out rooms to different people, give them any receipts they need and you file a return. who's to say where you sleep at night. dont think the revenue are gonna be looking at your bed.

They might, if you get reported by a pissed off tenant. Happens faster than you think.

athtrasna

mdebets wrote: »

They might, if you get reported by a pissed off tenant. Happens faster than you think.

Or a neighbour, or anyone who knows your business and doesn't approve. More likely to happen these days, people are pissed off at having to subvent people who don't play by the rules.

ramacc

athtrasna wrote: »

OP you are not alone in this situation but this does not give you the right to defraud the state by not declaring and paying tax on your rental income. You also will have to pay the €200 per year NPPR (as it would not be your primary residence) and register the tenancy with the PRTB and pay associated fees.

The advice you were given about renting a room is wrong. You still have to file a tax return for a rent a room scheme even though no tax is payable for rent a room income up to 10k (total income including payments for bills). This only applies where the landlord is resident, which you would not be.

Sadly the powers that be tend to be more dedicated to investigating the small guy, councils are pretty good at auditing properties liable for the NPPR and Revenue have publicly declared that they are intensifying investigations of undeclared rental income. The repercussions of this are huge.

If you have to move in with your boyfriend, and he can't move to you, then if you don't do things by the book you are leaving yourself open to a whole load of nightmare scenarios, Convert has identified some of them...and there are worse!

Yes the rent a room releif is wrong .. and if you are not registered with the PRTB you will not get a deduction against the rental income of your mortgage interest payable (Which you should note is restricted to 75% anyway.

magneticimpulse

I still do not know why your OH cannot move in with you.

You are stuck with this house for the next few years...you are not going to cover the mortgage by renting it.

Surely your OH should start looking for a new job next to the house you own? Instead of you renting and paying a mortgage?? The more sensible thing seems like your OH looks for a job. In the long term it is what you will have to do because it will be very difficult to continue your relationship for another 8 years...lose more on the mortgage of the house and still rent.

You do know the majority of people struggle to just pay a mortgage? Here is you expecting to pay for 2 properties and expect sympathy from the Government because you cant have it your way, while tax payers are expected to cough up money and the country sinks futher.

Take the sensible long term option. Boyfriend moves in with you. You have no tax problems. You dont have to rent and eventually he will find a new job and you have a home to start your family in.

What home are you expecting to use as your family home??? What is wrong with your place to be the family home?

not even wrong

It seems very unfair that people are being forced to let houses they would prefer to sell but cannot, and are further penalised.

You can sell the house. Cut the price and it'll sell no problem. If you can't cut the price because it won't cover the mortgage then you are stuck there and you don't get to move in with your boyfriend. In this recession there are people facing much worse situations than that who are much less to blame than you, so you don't get much sympathy from me.

But of course the world owes you a living and if you can't sell your house for a fat profit then you're entitled to defraud the taxpayer (which is what the advice about "leaving a room locked/keep the bills in your name" is talking about, make no mistake). It's lovely specimens like this who are the ones squealing for "debt relief".

mari2222

Check your home insurance carefully if you opt to rent-a-room while staying elsewhere a lot - the policy may specify the number of days per annum that you can be away from the home without affecting the insurance - either as a total per annum or as a total consecutively.

eobphotography

well I got a really good deal on my home insurance, as I reduced the insurance on the contents it actually came down! I registered with PRTB and for now I think thats all I am doing, I will file a tax return next year, as the rent does not even cover the mortgage I cant imagine I will be taxed much. When do I loose my TRS?

dearg lady

eobphotography wrote: »

well I got a really good deal on my home insurance, as I reduced the insurance on the contents it actually came down! I registered with PRTB and for now I think thats all I am doing, I will file a tax return next year, as the rent does not even cover the mortgage I cant imagine I will be taxed much. When do I loose my TRS?

As has been mentioned already, it's irrelevant for tax purposes if rent covers your mortgage or not. Tax is charged on rental income minus qualifying expenses.

I would imagine you lose the TRS when the house stops being your PPR. I would let them know once I had the house rented out.

Zamboni

eobphotography wrote: »

well I got a really good deal on my home insurance, as I reduced the insurance on the contents it actually came down! I registered with PRTB and for now I think thats all I am doing, I will file a tax return next year, as the rent does not even cover the mortgage I cant imagine I will be taxed much. When do I loose my TRS?

The moment you walked out the door.

http://www.revenue.ie/en/tax/it/leaflets/tax-relief-source-mortgage-interest-relief.html#section5

littleredspot

I wouldn't wish ill on anyone, but, becoming a landlord without having a clue what your doing is really asking for it these days.
There's lots of threads about how to do what your doing, you really should read them and/or speak to an accountant.

digzy

eobphotography wrote: »

well I got a really good deal on my home insurance, as I reduced the insurance on the contents it actually came down! I registered with PRTB and for now I think thats all I am doing, I will file a tax return next year, as the rent does not even cover the mortgage I cant imagine I will be taxed much. When do I loose my TRS?

I'm afraid that's irrelevant.you have to pay tax on rental income at either the higher/lower rate unless you're operating the rent a room scheme.

Pkiernan

Unfortunately the OP has no idea what she is in for when it comes to file her tax return.

OP - my advice is talk to an accountant, and then start putting aside money for your tax bill. As a rule of thumb it will be approx 30% of what you are paid in rent (including relevant deductions). So. if you are renting your property for 10k this year, expect a 3k tax bill.

And, as many have said - it doesn't matter that your mortgage bill may exceed your rent. The rental income is subject to income tax, PRSI, USC and any other applicable taxes.