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Letting house and renting another

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  • 25-07-2014 8:01pm
    #1
    20Cent
    Registered Users Posts: 8,934 ✭✭✭


    Hello all,

    Looking for a bit of advice. The house I bought is getting too small for our needs have two children since we bought it. We have a tracker mortgage with BOI and it is in negative equity.
    We would like to let out the house and rent somewhere bigger. I have found a great place and the rent is just 200 more then we would get in income from renting out our house. This is doable as is but just looking at the tax implications.

    The rental income will be taxed at the higher rate though I know some of it can be written off.

    Has anyone done similar and will it end up costing me a lot more to do?

    Thanks


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    #2
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Many people have thought about this and the vast majority of people abandon the idea.

    All the rental income is taxable income. You have some allowable costs you can deduct from the income before determination of the tax due- the main one being 75% of the mortgage interest.

    When its your PPR- you have it furnished to your standards- with nice furniture- a tenant doesn't appreciate this- and inevitably there is significant wear and tear associated with it.

    You need receipts for any items you depreciate in use in the rental- aka you can't say- that couch is worth 2k, and if I depreciate it on a flatline basis I have another 400 a year I can offset against my tax. Unless you have receipts- you can't do this. With a pre-furnishes house- you don't tend to have the receipts.

    You now pay USC on the gross rental income- regardless of whether you make a profit or not.

    You have to notify the bank that the property is no longer your PPR- and they may apply a loading to the interest rate, as you are now classified as an investor.

    The elephant in the room- is you cannot rent out your one and only property- and offset the rental income against letting somewhere else. So- you're paying significant tax on your rental income- but you have to pay for renting somewhere else out of your NET after tax income.........

    It is unfair.

    If you can make the figures add up- go for it- but its not nearly as straightforward as it seems.

    Ps- you have to register the tenancy with the PRTB and do an annual tax return detailing the rental- not a major undertaking- but it can be a little time consuming.

    The whole fly in the ointment happens- if a tenant decides to act the bollox- and not pay the rent. It can take you a considerable period of time to evict a non-paying tenant- meanwhile they could be destroying the place........


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