tax liability if renting out Principle primary residence

pwurple

Hi,
So, we have being trying to sell our home for over a year due to jobs having relocated. We have made the decision to rent it out instead, and have found potential tenants. We will rent a place closer to work, but are trying to work out how much rent we can now afford.

What will the tax liability on the incoming rent be? Just for ease of numbers...

Mortgage is 1000 euro per month, towards the end of its term, so is mostly capital.
Incoming rent will be 1000 euro per month

We expect to rent in new area for 1250 per month.

I understand PRTB will need to be paid with new tenants, and nppr, plus household charge. But do I also now pay income tax on that incoming rent, or does the rent I now pay offset it somehow?

pigeonbutler

pwurple wrote: »

Hi,
So, we have being trying to sell our home for over a year due to jobs having relocated. We have made the decision to rent it out instead, and have found potential tenants. We will rent a place closer to work, but are trying to work out how much rent we can now afford.

What will the tax liability on the incoming rent be? Just for ease of numbers...

Mortgage is 1000 euro per month, towards the end of its term, so is mostly capital.
Incoming rent will be 1000 euro per month

We expect to rent in new area for 1250 per month.

I understand PRTB will need to be paid with new tenants, and nppr, plus household charge. But do I also now pay income tax on that incoming rent, or does the rent I now pay offset it somehow?

Unfortunately you can't offset the rent you'll pay on your new home.

You'll have to pay income tax on the rental income after deducting mortgage interest (restricted to 75%) and costs like maintenance of the house. I'm not sure whether NPPR and household charge are deductible against.

KCTK

pigeonbutler wrote: »

Unfortunately you can't offset the rent you'll pay on your new home.

You'll have to pay income tax on the rental income after deducting mortgage interest (restricted to 75%) and costs like maintenance of the house. I'm not sure whether NPPR and household charge are deductible against.

NPPR and Household charge are Not deductible

pwurple

Blast, so it is as bad as I thought.

So as well as the additional 250 outgoings on the more expensive rent vs mortgage, plus the extra charges, we will also have the 42% due on the rental income... So need to find an additional 670 euro a month to fund this.

Ouch.

gerrykeegan

pwurple wrote: »

Blast, so it is as bad as I thought.

So as well as the additional 250 outgoings on the more expensive rent vs mortgage, plus the extra charges, we will also have the 42% due on the rental income... So need to find an additional 670 euro a month to fund this.

Ouch.

It's 41% plus you will pay usc at 7% and prsi at 4%

murphaph

gerrykeegan wrote: »

It's 41% plus you will pay usc at 7% and prsi at 4%

PRSI will not be due, assuming the OP already pays it under a PAYE employment and makes their return for this letting under the PAYE system (Form 12, as opposed to form 11). Burton was pondering getting rid of this allowance alright, but at the moment it's still there (apparently until 2013)

doolox

One for the politicians. In the event of a static housing market where it is next to impossible to sell a persons house but they need to move closer to get a new job, where they are penalised for devising a scheme whereby they can move and need to finance that move they are taxed to the hilt on renting their unsellable house and then must fund the rental in the new location out of extra earnings.

Then the govt wonder why people are inflexible about location when seeking a new job in the event of losing their previous job.

This needs to be tackled urgently as a labour activation measure. The department of Social Protection, Finance, and Labour need to get together and seek ways to facilitate labour movement in this benighted country.

maddragon

There's more good news too. If you rent out your ppr you will be liable for some CGT if you decide to sell. Have you looked at the rent s room scheme
http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html