How will my rental income be taxed

Mark26

I bought my own house last year. It's a 3 bed semi detached house in Kildare and would go for around €1,300 per month if i were to rent it. As i am a single man and don't need a 3 bedroom house to myself, i am considering renting it from January 1st. My question is, how much will i be taxed on this. The reason i want to know is because i'll be looking to rent a 1 bed appartment in the Dubln area and i need to know will it be affordable with the rental income.

I have made an appointment with an accountant but if anyone can give me any info beforehand, i'd greatly appreciate it.

Mark

DmanDmythDledge

Rental income (net profit) is liable to PAYE, USC and PRSI. The rate of PAYE and USC you pay will depend on your current earnings and whether or not you exceed the thresholds. PRSI is at 4%.

Various expenses relating to the property can be deducted when calculating the net rental profit liable to tax. Revenue have a pretty good leaflet on the topic.

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

However, if the rental income does not exceed €12,000 gross (2015 rate at least) you would not be liable to tax by availing of the rent-a-room relief. All the info is in the above link.

DmanDmythDledge

Also, if you were renting accommodation previously you may qualify for the rental tax credit on any rent paid when you rent the apartment in Dublin.

relax carry on

DmanDmythDledge wrote: »

Rental income (net profit) is liable to PAYE, USC and PRSI. The rate of PAYE and USC you pay will depend on your current earnings and whether or not you exceed the thresholds. PRSI is at 4%.

Various expenses relating to the property can be deducted when calculating the net rental profit liable to tax. Revenue have a pretty good leaflet on the topic.

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

However, if the rental income does not exceed €12,000 gross (2015 rate at least) you would not be liable to tax by availing of the rent-a-room relief. All the info is in the above link.

If the landlord is not residing in the house, the house is rented in its entirety. Therefore the rent a room scheme doesn't apply and all the rental income is taxable subject to the usual deductions etc.

Mark26

relax carry on wrote: »

If the landlord is not residing in the house, the house is rented in its entirety. Therefore the rent a room scheme doesn't apply and all the rental income is taxable subject to the usual deductions etc.

Yeah my plan is to rent the whole house out. I don't need a 3 bed house, but i'm sure there are plenty of families out there on the waiting list that do...

tommy100

Id say youd def make more money if you rent out 2 rooms rather than the whole house.
If u stay living in the house and rent out the the 2 rooms, i.e. total €1000 a month (12000 a year is threshold for the rent a room scheme), then u will pay NO TAX on your 12000 earnings.

But if u rent house, your earnings will be added to what you earn a year , and you will be liable to both 21% 40% income tax.
Rough figured off top of my head.
I.e
Your paye income 30k
Your rental income 1.3k x12 = 15.6k
Total earnings (excl expenses) =45.6k
* 20% tax on 4k and 40% tax on 11.6k
Usc is also charged on this.
Earnings = 5.5k tax alone on your rental income. Net pay23k + net rental10.1k= 33k approx
U STILL have to pay your own rent on top of this if leaving in an apartment.

Rent a room scheme
Net pay23k + (rent income 850×12)10.2k=33.2k
But u have no rent to pay and bills are shared.
I know what id do

Mark26

tommy100 wrote: »

Id say youd def make more money if you rent out 2 rooms rather than the whole house.
If u stay living in the house and rent out the the 2 rooms, i.e. total €1000 a month (12000 a year is threshold for the rent a room scheme), then u will pay NO TAX on your 12000 earnings.

But if u rent house, your earnings will be added to what you earn a year , and you will be liable to both 21% 40% income tax.
Rough figured off top of my head.
I.e
Your paye income 30k
Your rental income 1.3k x12 = 15.6k
Total earnings (excl expenses) =45.6k
* 20% tax on 4k and 40% tax on 11.6k
Usc is also charged on this.
Earnings = 5.5k tax alone on your rental income. Net pay23k + net rental10.1k= 33k approx
U STILL have to pay your own rent on top of this if leaving in an apartment.

Rent a room scheme
Net pay23k + (rent income 850×12)10.2k=33.2k
But u have no rent to pay and bills are shared.
I know what id do

Thanks for the help but the thing is I want to move back to Dublin, but I can only do that if the income from renting my house (if I do) covers the cost of renting a one bed apartment in Dublin.

tommy100

It wont

barneystinson

tommy100 wrote: »

Id say youd def make more money if you rent out 2 rooms rather than the whole house.
If u stay living in the house and rent out the the 2 rooms, i.e. total €1000 a month (12000 a year is threshold for the rent a room scheme), then u will pay NO TAX on your 12000 earnings.

But if u rent house, your earnings will be added to what you earn a year , and you will be liable to both 21% 40% income tax.
Rough figured off top of my head.
I.e
Your paye income 30k
Your rental income 1.3k x12 = 15.6k
Total earnings (excl expenses) =45.6k
* 20% tax on 4k and 40% tax on 11.6k
Usc is also charged on this.
Earnings = 5.5k tax alone on your rental income. Net pay23k + net rental10.1k= 33k approx
U STILL have to pay your own rent on top of this if leaving in an apartment.

Rent a room scheme
Net pay23k + (rent income 850×12)10.2k=33.2k
But u have no rent to pay and bills are shared.
I know what id do

You're completely ignoring all expenses, including mortgage interest.

tommy100

Yeah i am, i said this is rough

barneystinson

tommy100 wrote: »

Yeah i am, i said this is rough

Pretty feckin rough if you're assuming the fella has no mortgage interest or deductions to take off the rent... :pac:

karenalot

This is my 2014 tax return for a property I also let out in Kildare for €1300 a month. The property was purchased in 2006 and is on a tracker mortgage. I have rounded the figures off a little to make it easier to read.

Yearly Rent = €15,600

Minus
Mortgage Interest Relief - €2400
Repairs - €400
Expenses - €1200
Capital Allowances - €500
Total - 4500

Total Taxable Income - €11,100

Multiply €11,100 by your marginal tax rate (plus PRSI/USC) and it gives you roughly what you would owe to the tax man.

DmanDmythDledge

Also, it is worth noting that any accountants fees for preparing a tax return are deductible in calculating net rental income.