Tax is killing me- Landlord

sootie

Hello there to all of those in the know

Before anyone wastes their time on a beautiful Friday afternoon, Im only speculating and trying to educate myself. I can look in the mirror or chat to my family if I want to be offended or lectured

I am the reluctant owner of two houses. Neither of which I live in. I was left a damp old cottage in the West from my grandmother and I bought a cheap house in the mindlands when I thought my life would be there. I was made redundant and forced to move. However, I rent an eyewateringly expensive apt in Dublin where I work.

Now, I have a room let out in Longford. The rent is so cheap that it falls WAY beyond the rent a room threshold but the mortgage is low so Im sucking it up.

The house in the west... its cold and damp and probably should be knocked but is facing the sea and I actually have some interest from people looking to rent it. The absolute max I would ask for is €350

So I know every landlord must register and pay tax on income but I was wondering if there was a threshold like the rent a room? I know everyone has to pay tax but at 350 for the house I was wondering if there was anything I could work around... "say" it was a rent a room... ? can you have two rent a rooms even ?

Im not looking to avoid paying tax... but if there was a reasonable way to like....not... I would be all ears.

thanks !

Zzippy

Would you not sell the house in the west and use the money to reduce the mortgage on the house in Longford? You would probably have to spend a significant sum to bring it up to minimum standards for rental accommodation before you could rent it out.

I'm pretty sure you can't "rent a room" in two houses, as it is you're supposed to be living in the house in Longford to avail of the rent a room tax break on the house there, so you're already avoiding paying tax.

mickdw

sootie wrote: »

Hello there to all of those in the know

Before anyone wastes their time on a beautiful Friday afternoon, Im only speculating and trying to educate myself. I can look in the mirror or chat to my family if I want to be offended or lectured

I am the reluctant owner of two houses. Neither of which I live in. I was left a damp old cottage in the West from my grandmother and I bought a cheap house in the mindlands when I thought my life would be there. I was made redundant and forced to move. However, I rent an eyewateringly expensive apt in Dublin where I work.

Now, I have a room let out in Longford. The rent is so cheap that it falls WAY beyond the rent a room threshold but the mortgage is low so Im sucking it up.

The house in the west... its cold and damp and probably should be knocked but is facing the sea and I actually have some interest from people looking to rent it. The absolute max I would ask for is €350

So I know every landlord must register and pay tax on income but I was wondering if there was a threshold like the rent a room? I know everyone has to pay tax but at 350 for the house I was wondering if there was anything I could work around... "say" it was a rent a room... ? can you have two rent a rooms even ?

Im not looking to avoid paying tax... but if there was a reasonable way to like....not... I would be all ears.

thanks !

From what you say you are working the rent a room on the house with the mortgage thereby making no use of the tax allowance for mortgage interest.
You are then going to rent the cottage and pay tax on it and have no mortgage to claim tax releaf against.
If the cottage for fit to mortgage, you could raise some money on it and reduce you other mortgage by that amount.
This would leave you something yo claim against tax on the cottage and there would be no change to the rent a room on the other house.
You would need to run figures to see if worthwhile and of course if the cottage is poor you wouldnt be able to do that anyway.

SarahMollie

Actually OP, you shouldnt even be using the Rent a room scheme as things stand.
It only applies to renting a room in your home where you live, and as you've said, you actually live in Dublin.

Michael D Not Higgins

SarahMollie wrote: »

Actually OP, you shouldnt even be using the Rent a room scheme as things stand.
It only applies to renting a room in your home where you live, and as you've said, you actually live in Dublin.

This is correct. OP, you claim to know your tax liabilities but you clearly don't.

Also mod note, any advice of tax fraud will be infracted.

A_Sober_Paddy

SarahMollie wrote: »

Actually OP, you shouldnt even be using the Rent a room scheme as things stand.
It only applies to renting a room in your home where you live, and as you've said, you actually live in Dublin.

I know two people who own homes in their home town/city and live in Dublin, but rent out there homes on the rent a room thing, relive the rent they get covers the mortgage...seems quiet common...

SarahMollie

A_Sober_Paddy wrote: »

I know two people who own homes in their home town/city and live in Dublin, but rent out there homes on the rent a room thing, relive the rent they get covers the mortgage...seems quiet common...

Just because its common, doesn't make it legal.

A_Sober_Paddy

SarahMollie wrote: »

Just because its common, doesn't make it legal.

never suggested it was legal, but seems a tad silly that if you rent out part of your home you can get 12,000€ tax free in rent, but if you don't live there you pay somewhere in the region of 45% tax on all rental income

SarahMollie

Its a tax break provided under a specific set of circumstances. If those circumstances don't apply to you, then you're not entitled to said tax break. The purpose I believe is to allow people to make money from extra space in their own homes, not to enable people to become small time landlords.

Rates of tax on rental incomes are a separate issue. I happen to think they're punitive for most LL's but trying to pull a fast one of the rent a room scheme isn't the answer.

sootie

Michael D Not Higgins wrote: »

This is correct. OP, you claim to know your tax liabilities but you clearly don't.

Also mod note, any advice of tax fraud will be infracted.

I said I know I have to pay tax and wanted to EDUCATE MYSELF. As the title says Im being KILLED with tax already and I wondered how other were managing. thanks for the help though.

sootie

SarahMollie wrote: »

Its a tax break provided under a specific set of circumstances. If those circumstances don't apply to you, then you're not entitled to said tax break. The purpose I believe is to allow people to make money from extra space in their own homes, not to enable people to become small time landlords.

Rates of tax on rental incomes are a separate issue. I happen to think they're punitive for most LL's but trying to pull a fast one of the rent a room scheme isn't the answer.

A small time landlord and a reluctant landlord are not the same thing. I should have just stayed in the midlands and claimed the dole and threw out a few kids while I was at it. That way I would get all sorts of breaks rather than staying in school, actually making a living, paying every bill as it comes.

Mrs OBumble

OP, you say you're being killed with tax. But I cannot see how it is killing you: you will not pay tax unless you have the income in the first place. (Unless it is the very concept of paying any tax that kills you - many of us hate paying 50%+, but it's not fatal!)

In terms of allowances, you have a personal tax credit of 1650. This means you do not pay tax on your first 8k (ish) of income. If you are a PAYE worker, you also have another tax credit for this - that's you up to 16k of income tax free. Most likely you are applying both of these against your day job.

As far as your side land-lording business (reluctant or otherwise) goes, there are various allowable expenses. They include property management costs, 75% of the mortgage interest, insurance, maintenance after the rental starts - and maybe some others. If your cottage in the west were to be rented out, then most likely the tenants would want you to fix the dampness - so the cost of doing this would be a deductible expense. There might be other things they ask you to fix - or which you believe you should fix to keep it safe for rental purposes. I think you'll see where I'm going here.

Do check with an accountant if there are any limits on this, because of course the work would be increasing the value of the cottage, too. Also inform yourself how capital gains tax applies in this situation - I haven't a clue how it applies relative to the inheritance tax.

But it seems to me there are things you can do here.

SarahMollie

sootie wrote: »

A small time landlord and a reluctant landlord are not the same thing. I should have just stayed in the midlands and claimed the dole and threw out a few kids while I was at it. That way I would get all sorts of breaks rather than actually making a living and being killed by tax because I was made redundant by the government.

OK, firstly calm down - I'm not having a go at you so theres no need to get defensive.

You said you wanted to educate yourself, so being informed by others how schemes work surely comes under that banner.

If you came here just looking for people to agree with you and offer sympathy then maybe you shouldnt have pitched you OP as looking for advice based on the tax system as it exists, not how you'd rather it was.

You're sounding quite hard done by but you own 2 properties, one which was given to you, so a lot of people would think your fortunate. If its beyond your means to hang on to both properties, then sell one, and use the money to offset your other liabilities.

Yes you're renting in Dublin which is expensive (been there!) but you're also benefiting from the higher wages+more jobs that Dublin offers.

Also, you say you're crippled by tax but how so? You're using the rent a room scheme in your midlands property (even if by rights you shouldn't be) so I doubt you're paying tax on that as rents in that region wouldnt breach 12k per year. You've not yet rented the Mayo property, so no tax there either.

If you're just talking income tax, then we're all paying that, like it or not.

MarkAnthony

On the rent a room. The OP is renting an apartment in Dublin for work. There is an argument to be made the address which he's doing the rent a room on is his primary residence, if in fact it actually is. If the tenant down in Longford think they've got complete possession on the other hand it's a sticky wicket for the OP.

That aside OP really? You've two rentals going on and you're educating yourself on boards. Get along to an accountant and educate yourself properly. Also why are you renting an entire apartment in Dublin if you can't afford it. Rent a room, preferably Mon-Fri and strengthen the claim that the rental in Longford is your primary residence. Primary residence does not have to be the one you're at the most, although that obviously is a bloody good indication.

I'm afraid you'll get very little sympathy in your current predicament, you need more of a kick up the arse tbh. Get along to an accountant and get sorted, best of luck with it all.

Michael D Not Higgins

MarkAnthony wrote: »

On the rent a room. The OP is renting an apartment in Dublin for work. There is an argument to be made the address which he's doing the rent a room on is his primary residence, if in fact it actually is. If the tenant down in Longford think they've got complete possession on the other hand it's a sticky wicket for the OP.

Not by their own admission, since they said they don't live there.

MarkAnthony

Michael D Not Higgins wrote: »

Not by their own admission, since they said they don't live there.

Quite, and to be clear I'm not advocating tax fraud. As a fully compliant LL myself it pisses me off no end that I'm paying for all those that don't. That said the OP could and in my opinion should, look to be using the Longford home as their primary residence, in fact, not just as a tax dodge.

My post was also meant to be more general than it came across in the first paragraph, apologies.

thebeerbaron

Hi OP, FYI there IS a limit on the amount you have to earn to pay income tax on rental income. I believe it is around €4000 or €3800 which can include expenses. I talked to an accountant at xmas about my rental income for 2015 and he informed me that due to my income being so low I did not need to file a tax return.

For anyone wondering why it was so low the lease was only April to Dec

Michael D Not Higgins

thebeerbaron wrote: »

Hi OP, FYI there IS a limit on the amount you have to earn to pay income tax on rental income. I believe it is around €4000 or €3800 which can include expenses. I talked to an accountant at xmas about my rental income for 2015 and he informed me that due to my income being so low I did not need to file a tax return.

For anyone wondering why it was so low the lease was only April to Dec

That doesn't sound correct at all. If the rent was your only income then it might be within your tax free allowance but you still need to submit a self assessed tax return to Revenue.

sootie

Awh thanks everyone ! great feedback. I asked a question in relation to tax ,didn't want to bore in the original post about my personal expenses but sure feel free to judge.

Anyway, nice friendly place here. I asked the question because like every other person in this poxy country Im seeing all sorts going on around me and I wanted to know if there was something I could do LEGALLY to manage my spirling and crippling expenses.

thanks to those who read the question and answered factually. Now, I must go and book an appointment with my accountant lol, how foolish of me to think I could throw a question out there on a forum.

I guess it was the Samaritans I should have rang or pieta house again instead rather than try to find a workable solution.

Del2005

sootie wrote: »

Awh thanks everyone ! great feedback. I asked a question in relation to tax ,didn't want to bore in the original post about my personal expenses but sure feel free to judge.

Anyway, nice friendly place here. I asked the question because like every other person in this poxy country Im seeing all sorts going on around me and I wanted to know if there was something I could do LEGALLY to manage my spirling and crippling expenses.

thanks to those who read the question and answered factually. Now, I must go and book an appointment with my accountant lol, how foolish of me to think I could throw a question out there on a forum.

I guess it was the Samaritans I should have rang or pieta house again instead rather than try to find a workable solution.

The reason why we have crippling expenses is because everyone knows people who don't pay their way yet don't report it. We can't have it both ways.

sootie

Del2005 wrote: »

The reason why we have crippling expenses is because everyone knows people who don't pay their way yet don't report it. We can't have it both ways.

Ok this is boring now. I never said I was not reporting. You have no clue why I have crippling expenses so its time I moved off this.

athtrasna

Mod note

Sootie you have already been warned for being uncivil. Posters on here are taking the time to share their knowledge and experience, please respect that and them in order to avoid further mod actions.

SarahMollie

You want people to give advice without giving all the information.

On the information you have given so far, there doesn't seem to be a problem, yet you post vitriolic nonsense to people who took the time to address your OP.

The advice of going to an accountant is solid advice. On matters such as tax, you cant just rely on Boards.

Ask the mods to close the thread if you don't like what what people are saying.

OttoPilot

Why not sell the houses? If one is sold at a loss it can be offset against the others profit. You've alluded to crippling expenses so it sounds like you need money now. That's a fast way to get cash!

sootie

Del2005 wrote: »

The reason why we have crippling expenses is because everyone knows people who don't pay their way yet don't report it. We can't have it both ways.

OttoPilot wrote: »

Why not sell the houses? If one is sold at a loss it can be offset against the others profit. You've alluded to crippling expenses so it sounds like you need money now. That's a fast way to get cash!

The house in the west has an asbestos roof and a shared septic tank... wont sell. I have the house in the midlands on the market for three years. I was offered 25k for it and I paid over 100K

sootie

Id like to apologise to anyone I offended during my panic attack. Im clearly not thinking straight. I cant afford an accountant, sorry for bothering you all.

MarkAnthony

sootie wrote: »

Id like to apologise to anyone I offended during my panic attack. Im clearly not thinking straight. I cant afford an accountant, sorry for bothering you all.

As corny as it is, it sounds like you can't afford not to hire an accountant.

I'm afraid as I said before you're not going to get much sympathy when you're paying Dublin rents and own two houses. It would be better to rent a room in Dublin if you've not got a couple of hundred quid spare to speak to a professional whose fee is tax deductible and will likely save you well in excess of his/her full fee anyway.

OttoPilot

sootie wrote: »

The house in the west has an asbestos roof and a shared septic tank... wont sell. I have the house in the midlands on the market for three years. I was offered 25k for it and I paid over 100K

25k cash, no tax, and a loss you can carry forward until you eventually sell the cottage. It's likely the value of the house has fallen significantly from the 100k you paid and there's no way out of that really.

If your expenses are due to renting and paying mortgage, it's clear you need to ditch the mortgage asap. Talk to your bank to try and restructure. You won't really know what's best unless you do.

SarahMollie

MarkAnthony wrote: »

As corny as it is, it sounds like you can't afford not to hire an accountant.

I'm afraid as I said before you're not going to get much sympathy when you're paying Dublin rents and own two houses. It would be better to rent a room in Dublin if you've not got a couple of hundred quid spare to speak to a professional whose fee is tax deductible and will likely save you well in excess of his/her full fee anyway.

Are there not free advice services for mortgagees in distress? I don't know the names, but there must be a way of getting proper advice our there.

OP, if your cottage looks out over the sea, it has some value, even if only for the site. It might ease the burden somewhat.

hanna200

without asking your age and the original length of mortgage term i strongly suggest you to apply to bank in writing to extend the mortgage term by at least 5-10 years if not more (provided your age allows it)

also selling cottage now (even if the sale is to be within your own family for a nominal value) might spare you bigger emotional distress in the event of potential repossession of Longford house, as if bankruptcy crosses your path, it may be that liquidating this asset now in one way or the other is more beneficial to you rather than retaining it as is. Again you can sell within your own folks.

MarkAnthony

SarahMollie wrote: »

Are there not free advice services for mortgagees in distress? I don't know the names, but there must be a way of getting proper advice our there.

OP, if your cottage looks out over the sea, it has some value, even if only for the site. It might ease the burden somewhat.

MABS etc. Did the OP indicate he was in mortgage distress though? Genuine question I probably missed it.

hanna200 wrote: »

without asking your age and the original length of mortgage term i strongly suggest you to apply to bank in writing to extend the mortgage term by at least 5-10 years if not more (provided your age allows it)

If the OP get's his finances in Dublin in order there's no reason he can't clear the mortgage off on the mortgaged house in short order. Apartment v Room in Dublin is at least €500 of difference in net income every month. He's got €350 coming in on that place too so I'm at a loss to understand where he's in financial distress to be honest.

My mortgage in Dublin is significantly more than €100K and is less than €800 a month.

SarahMollie

MarkAnthony wrote: »

MABS etc. Did the OP indicate he was in mortgage distress though? Genuine question I probably missed it.

Not exactly I suppose, but he's trapped by a property in negative equity so maybe they could give some guidance on talking to the bank and restructuring the loan.

pwurple

Oh I hate to see people with a job and assets in financial stress. Hopefully we can help with some reassurances.

I've bought a property with asbestos roof before. I paid asbestos contractor to remove roof, and the place was perfect afterwards. Don't be worried about that at all if you want to sell. It might only be worth the site, but that's surely still better than a kick in the face. especially if you can use it to pay down the mortgage in longford and use the rent there to part-subsidise you in Dublin.

Renting out a place with asbestos roof I'd be slower to do... from an ethical point of view. You could try an Air BnB type setup to see if there was an appetite for it as a holiday cottage, but you must declare this of course, and pay whatever marginal rate of tax you're at... less tax deductible expenses (like an accountant). I'd replace the roof first though, which may be beyond your means, which puts you back to selling it.

And on not wanting to pay tax... in order to dig yourself out of any financial hole, you need steady, increasing, income. And where you have more income, you have tax. You have to factor it in, and do your calculations accordingly.

If you wanted to post more details, people could give more specific advice.

Are you PAYE, if so, what band?

What is left over after paying your rent and other living expenses in dublin?

Is there any other regular income you can think of to chop temporarily... car, sky tv, expensive phone package?

Mortgage repayments and capital left to pay in longford. Interest rate?

Can you claim more tax allowances. Engineers have some sort of nominal tool tax allowance. Anyone who has a uniform for work gets something small as well.

Have you a base site value for the mayo cottage?

murphaph

I don't like seeing wasters get an easy ride either op but your first priority should be getting your tax affairs in order. Intentionally or not you are engaged in tax evasion by availing of the rent a room scheme. Are you even declaring the income on a Form 12 each year?

TeaBagMania

As for the old cottage in the west, maybe finding a tenant with the appropriate qualifications that could repair\restore the cottage in exchange for say one or two years of free rent?

Uninhabited homes degrade quickly

Pawwed Rig

thebeerbaron wrote: »

Hi OP, FYI there IS a limit on the amount you have to earn to pay income tax on rental income. I believe it is around €4000 or €3800 which can include expenses. I talked to an accountant at xmas about my rental income for 2015 and he informed me that due to my income being so low I did not need to file a tax return.

For anyone wondering why it was so low the lease was only April to Dec

Your accountant was wrong. You have to file either a Form 11 or 12 (essentially the same thing).
OP would also have to disclose that he is availing of the rent a room scheme too on the return.

thebeerbaron

Pawwed Rig wrote: »

Your accountant was wrong. You have to file either a Form 11 or 12 (essentially the same thing).
OP would also have to disclose that he is availing of the rent a room scheme too on the return.

Perhaps I have to declare it but that the amount I earned was too low to pay tax on

Baby01032012

thebeerbaron wrote: »

Perhaps I have to declare it but that the amount I earned was too low to pay tax on

The only way I can see no tax being due if you were renting out rooms in your own house and claiming rent a room relief where total payments were less than the €12k limit or if where your expenses were greater than the income and you are in a net loss situation.Both would require you to declare the figures on your return. Even if a loss you would want to carry that loss forward to the following year for use against future taxable profits, I'd presume

Pawwed Rig

If it was your sole income then you could earn €8,250 or if married and property in joint names then €16,500 without paying any tax as you would have the single married credit to offset.
It assumes that you have zero other income though and as stated would still need to be returned.

The OP said that they have other income so not relevant in this case