renting out home- tax questions

detoxkid

Hi there. I have to relocate for work and have to rent out my house. we have found tenents which we are happy with, changed the insurance and are in the process of registering the house with the PRTB. I contacted revenue re tax and they said 'The gross rental income received less expenses for 2013 should be declared in the following year by completing and submitting a Form 12 to your local Tax Office'. the rent I am getting for the house does not cover the mortgage. Also, I currently receive around 80 euro mortgage income relief from the tax office which doesn't seem to have stopped. My question is:
- Do I need to contact revenue again to tell them to stop my mortgage income relief? Obviously I need the money but I don't want to have to pay back a lumpsum...
-Does anyone know how much I will have to pay back at the end of the year?
Sorry for all the questions...I have tried to read the revenue website but its like double dutch to me. I'm pretty broke and only moving cause I have to!

godtabh

MIR would need to be stopped. You can only use a % of the mortgage interest you pay as an expense. Even if the rent doesn't pay the mortgage it is likely you will still have to pay tax

howardmarks

1 search revenue ie for the number for the mortgage interest relief at source section. It's seperate to everything else in your taxes. You need to notify them or if/when u return the rents you'll get hit with a bill
2 think it's 75% allowable interest against income(don't quote me tho) and the capital part is not allowable.
3 used to be that rents covered mortgages and people made profit. Bubble destroyed that. Tax is due on rent recieved less allowable deductions. The fact it doesn't cover the mortgage is irrelevant. Your earning income and it's taxable

gabbytheking

Personally if I were you I would retain a room for weekends and argue that i'm just renting a portion of the rooms(or even just say same). Then I could claim rent a room relief which wouldn't effect my MIR(could save a 1,000+ over a year) and would mean the income up to 10k is exempt from income tax(saving of up to 52% or 5,200). I know a nurse doing this and she never/rarely actually uses the house. Also in the above instance you don't have to pay PRTB(179 odd saving) or you don't lose a portion of your Principal Private Residence Relief should you make a profit for capital gains tax in the future(Saving of god knows say 2/10 x 33% of gain). You will also not be liable to the Non Principle Private Residence Tax(200) which otherwise you would be as you are not living in your PPR and you are renting. All in all a saving of '000's depending on your tax rate USC rate MIR etc. This may even out perform your actual rent be careful and think it through is all I'll say. Renting some rooms for 3k per year might actually out perform a rent of 6k if you earn over 34k and are single. Info below:

http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html


http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/new_local_authority_charges_on_residential_property.html

howardmarks

gabbytheking wrote: »

Personally if I were you I would retain a room for weekends and argue that i'm just renting a portion of the rooms(or even just say same). Then I could claim rent a room relief which wouldn't effect my MIR(could save a 1,000+ over a year) and would mean the income up to 10k is exempt from income tax(saving of up to 52% or 5,200). I know a nurse doing this and she never/rarely actually uses the house. Also in the above instance you don't have to pay PRTB(179 odd saving) or you don't lose a portion of your Principal Private Residence Relief should you make a profit for capital gains tax in the future(Saving of god knows say 2/10 x 33% of gain). You will also not be liable to the Non Principle Private Residence Tax(200) which otherwise you would be as you are not living in your PPR and you are renting. All in all a saving of '000's depending on your tax rate USC rate MIR etc. This may even out perform your actual rent be careful and think it through is all I'll say. Renting some rooms for 3k per year might actually out perform a rent of 6k if you earn over 34k and are single. Info below:

http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html


http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/new_local_authority_charges_on_residential_property.html

Rent a room relief only applies to an individual if they live in their principle private residence and rent one or more rooms. What your advising is tax evasion.

gabbytheking

Its not tax evasion if he retains a room. I don't see anything on the information leaflets to say that the above is not correct. Point it out and I will reflect on same.

howardmarks

gabbytheking wrote: »

Its not tax evasion if he retains a room. I don't see anything on the information leaflets to say that the above is not correct. Point it out and I will reflect on same.

Qualifying Residence 4.1 Sole or main residence
The room or rooms must be in a residential premises that is situated in the State and that is occupied by an individual as his/her sole or main residence during the particular tax year. An individual may live in more than one residence but can only avail of rent-a-room relief in respect of his/her sole or main residence. In general, an individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him/her. The individual does not have to own the residence and it could, for example, be occupied as rented accommodation.


To be honest the whole thing is very vaguely worded. It's wide open to interpretation. I'll retract my tax evasion comment

capefear

Also check with your mortgage paper work as if you are on a tracker and rent out the house you lose the tracker. I stand to be corrected on this but something for you to check out as well.

gabbytheking

If you have any interest in what I mentioned above just have a look at the revenue manual just google "7.1.32 - Rent-a-Room Relief".

It states that the PPR doesn't have to be your only residence of the individual see Para 4.1 "An individual may live in more than one residence but can only
avail of rent-a-room relief in respect of his/her sole or main residence." the only stipulation it says is in the same paragraph where it says "In general, an
individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him/her."

Now alot depends on your interpretation of the above and your understanding of "In general" but to me it seems very Grey and open to Circumstances TBH. I believe it was worth a mention and I know 2 people doing it off the top of my head. All bought in the good times. Can't get a job at home and travel to Dublin for work but like to have a home to return to if needs be. One lady is a lecturer and probably stays in the house 1-3 nights a week for the past 3 years the other a nurse probably a similar ratio if not a bit less but its not because they want to live elsewhere and pay rent circumstances don't permit otherwise.

gabbytheking

capefear wrote: »

Also check with your mortgage paper work as if you are on a tracker and rent out the house you lose the tracker. I stand to be corrected on this but something for you to check out as well.

Very very very good advice!!!!

gabbytheking

howardmarks wrote: »

To be honest the whole thing is very vaguely worded. It's wide open to interpretation. I'll retract my tax evasion comment

Respect! Fellow CTA?

howardmarks

gabbytheking wrote: »

Respect! Fellow CTA?

Thanks mate but No although I'm currently partaking in one of the institutes courses.
How did you find the CTA exams/ course work and was it worthwhile afterwords?

Pass the Sauce love

gabbytheking wrote: »

If you have any interest in what I mentioned above just have a look at the revenue manual just google "7.1.32 - Rent-a-Room Relief".

It states that the PPR doesn't have to be your only residence of the individual see Para 4.1 "An individual may live in more than one residence but can only
avail of rent-a-room relief in respect of his/her sole or main residence." the only stipulation it says is in the same paragraph where it says "In general, an
individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him/her."

Now alot depends on your interpretation of the above and your understanding of "In general" but to me it seems very Grey and open to Circumstances TBH. I believe it was worth a mention and I know 2 people doing it off the top of my head. All bought in the good times. Can't get a job at home and travel to Dublin for work but like to have a home to return to if needs be. One lady is a lecturer and probably stays in the house 1-3 nights a week for the past 3 years the other a nurse probably a similar ratio if not a bit less but its not because they want to live elsewhere and pay rent circumstances don't permit otherwise.

The above line clearly states that the main residence is the individuals home for the greater part of the time, surely 1-3 days a week is less than half a week, thus the TP cannot claim rent a room relief as its not their main residence.

Mr. Incognito

Gabby is correct.

In practice to prove residence of landlord PPR rent a room relief Revenue want to see bills in the homeowners name such as utility bills for the period.

For PPR relief, which should be the no 1 consideration the CGT can be crippling they will require documentary evidence such as voter registration, utility ills, car registered to that address etc.

space_man

Pass the Sauce love wrote: »

The above line clearly states that the main residence is the individuals home for the greater part of the time, surely 1-3 days a week is less than half a week, thus the TP cannot claim rent a room relief as its not their main residence.

i'm inclined to concur.
it would depend surely on what/where the Revenue deems/interprets to be your PPR. i reckon you would need to be able to prove/demonstrate that this property was your PPR, (and not just a house you were renting out and pretending to be your PPR).
the Revenue could easily take the view you were trying to deceive them, and they dont like that kind of carry on.

space_man

Mr. Incognito wrote: »

Gabby is correct.

In practice to prove residence of landlord PPR rent a room relief Revenue want to see bills in the homeowners name such as utility bills for the period.

For PPR relief, which should be the no 1 consideration the CGT can be crippling they will require documentary evidence such as voter registration, utility ills, car registered to that address etc.

but Gabby is contending that all the owner needs to do is "retain(s) a room" to avail of Rent a Room relief? i disagree.
i think the revenue will require more than that, (as you point out in the 2nd part of your response).

gabbytheking

howardmarks wrote: »

Thanks mate but No although I'm currently partaking in one of the institutes courses.
How did you find the CTA exams/ course work and was it worthwhile afterwords?

I did accounting CA first and just sat them a 2 years later ish. I downloaded all the books from the Tax Find CD and restudied part 1's before going back to the part2's(Part1 exempt). There tough although if you have an interest which you obviously have you'll get through pretty well. Part 1 will give you a very good foundation in Income tax and Capital gains tax(from memory) including CGT PPR Relief. If you have the energy, interest and motivation there golden. I wouldn't just do them for a qualification without 100% dedication though as there not much good just as a passed exam, as they come with little or no powers as such(Unlike maybe the accounting qualification etc). But if you have a real interest and are willing to get into the nitty gritty of tax and the acts you will be highly regarded. To many small Accounting/Solicitors practices there a very attractive qualification. Best of luck if you go ahead with it!

gabbytheking

space_man wrote: »

i'm inclined to concur.
it would depend surely on what/where the Revenue deems/interprets to be your PPR. i reckon you would need to be able to prove/demonstrate that this property was your PPR, (and not just a house you were renting out and pretending to be your PPR).
the Revenue could easily take the view you were trying to deceive them, and they dont like that kind of carry on.

As you mention this would be the logic and I agree with you keeping documentary evidence that you still reside in the premises however you are overlooking the 2 words before the PPR line in the act which states "in general". Under Section [s. 604(5)(b)(ii)] of the TCA 1997 tells us that an individual shall be deemed to have occupied the dwelling house if an employee is required to move to meet the requirements of his employment see extract:
Employer required absences in Ireland [s. 604(5)(b)(ii)]:   
   ■ any period or periods of absence not exceeding in aggregate 4 years,  
   ■ throughout which the individual was prevented from residing in the dwelling due to the location of his/her place of work or due
to conditions imposed by his/her employer for the effective performance of his duties; and,  
       
   ■ resided in the dwelling as his/her PPR both before and after the absence; and  
   ■ had no other dwelling that qualified as a PPR (under s. 604) during that period.

See also section 604 of the TCA http://www.irishstatutebook.ie/1997/en/act/pub/0039/sec0604.html

This is an example from the CGT PPR Relief and doesn't refer precisely to the Rent a room relief however it is hard not to win any query with the revenue if you produce the act document especially as the Acts on Rent a room relief doesn't say anything to the contrary! Of course you'd still have to retain your room and probably as you suggest a few bills maybe voting cards etc to the residence Mobile broadband/phone seems like a good bill especially if you opt for e-billing to your address!!

Good debate on here nothing interest the Irish(me included) more than a good old debate. As the questioner hasn't replied at all I assume his gone else where so I'll head too chat to ye!