Landlords costs

Ms Doubtfire1

Ok, there's lot and lots of threads like Ll costs and tenants costs..but, as tenant, I actually have no idea what the LL due's are to the various taxes etc?
Can anyone enlighten me?

utmbuilder

if a landlord has a social tenant they get 100% of their mortgage as tax relief , ( I believe correct me if I am wrong)

so if their mortgage is 800 and the rent they charge is 1500, they have to pay tax on 700 which is normally in the region of 51%

they also have to register prtb approx 100, with fines for late registration if they dont register, then there is the upkeep on the house.


if they dont have a social tenant their mortgage relief is 80%, so they are worse off

if landlords are caught not paying tax for a long period , its a very serious offensive if it lands in the court, vat and income tax fraud in the courts normally come with a jail sentence. do a google on recent court judgements against tax fraud.


revenue have not ran proactive campaigns against landlords with their automated (REAP) system, however with such turmoil with government and the rental sector dont be surprised is a massive clamp down is on the way.

Ms Doubtfire1

and if LL has no mortgage?

utmbuilder

a PAYE worker, you could pay 48 per cent tax on rental income. If you're self-employed, you also have to pay 4 per cent PRSI which brings up the amount of tax paid to 52 per cent – or 55 per cent if you're earning more than €100,000.

utmbuilder

My bad Revenue are scanning for Scam Artist landlords since the end of 2013,


see page 10

"16.43 Cases selected for review by Revenue include both known and potential rental income
cases (for example where rental income is not declared, but third party data or local
intelligence indicates a potential source of rental income). Cases are selected at a
district level by an audit case selection officer based on an analysis of information
available from REAP and locally gathered intelligence.2
"

http://audgen.gov.ie/documents/annualreports/2013/report/en/Chap16.pdf

Fian

utmbuilder wrote: »

a PAYE worker, you could pay 48 per cent tax on rental income. If you're self-employed, you also have to pay 4 per cent PRSI which brings up the amount of tax paid to 52 per cent – or 55 per cent if you're earning more than €100,000.

You also pay USC on the gross income before deductions.

The mortgage deductions are 75% (100% for social tenants) of the mortgage interest, not the mortgage payments.

Management fees (for all apartments) are generally in the region of one months rent a year. Then there is wear and tear, maintenance etc.

Pkiernan

utmbuilder wrote: »

if a landlord has a social tenant they get 100% of their mortgage as tax relief , ( I believe correct me if I am wrong)

so if their mortgage is 800 and the rent they charge is 1500, they have to pay tax on 700 which is normally in the region of 51%

they also have to register prtb approx 100, with fines for late registration if they dont register, then/quote]

No. Only the interest I'd tax deducted not the mortgage payment.

exaisle

utmbuilder wrote: »

if a landlord has a social tenant they get 100% of their mortgage as tax relief , ( I believe correct me if I am wrong)

so if their mortgage is 800 and the rent they charge is 1500, they have to pay tax on 700 which is normally in the region of 51%

they also have to register prtb approx 100, with fines for late registration if they dont register, then there is the upkeep on the house.


if they dont have a social tenant their mortgage relief is 80%, so they are worse off

Sorry...I'll have to correct you.....

Only the INTEREST portion of mortgage repayments are allowable against income tax. So...if the rent is 1500 and the mortgage repayment is 1500, on average, roughly half of the mortgage payment will be interest and if they don't have "social tenants" then only 75% of the mortgage interest is allowable for tax purposes.
If they do have "social tenants" they still pay income tax on the basis that only 75% of the mortgage interest is allowable and can only make a claim to recalculate their tax bills after three years.

You can probably assume that about 10% of the gross rent will go in repairs, maintenance and other expenses (assuming you have good tenants), so the landlord ends up paying Income Tax on about €788 per month which could be as much as €410 per month. That's with rent that's only sufficient to cover the actual mortgage repayments.
The longer the mortgage is in existence, the lower the interest and the higher the tax bill.

Apologies to the two posters above me...my reply was a bit more long winded and took more time to write.. :-)

Gumbo

utmbuilder wrote: »

if a landlord has a social tenant they get 100% of their mortgage as tax relief , ( I believe correct me if I am wrong)

so if their mortgage is 800 and the rent they charge is 1500, they have to pay tax on 700 which is normally in the region of 51%

they also have to register prtb approx 100, with fines for late registration if they dont register, then there is the upkeep on the house.


if they dont have a social tenant their mortgage relief is 80%, so they are worse off

if landlords are caught not paying tax for a long period , its a very serious offensive if it lands in the court, vat and income tax fraud in the courts normally come with a jail sentence. do a google on recent court judgements against tax fraud.


revenue have not ran proactive campaigns against landlords with their automated (REAP) system, however with such turmoil with government and the rental sector dont be surprised is a massive clamp down is on the way.

Just to correct you as this is wrong.
You get 75% of the interest portion only.

So if the mortgage is €800 (€600 of which is interest) and you get rent of €1500, you actually pay tax on €1150. You also pay PRSI, usc.

You do have right off though, mortgage protection policy, building insurance, repairs and maintenance.

You cannot write off property tax or costs pre letting.

Fkall

Local property is also an expense - that is paid from after tax income

utmbuilder

Complicated process all the same!

exaisle

kceire wrote: »

Just to correct you as this is wrong.
You get 75% of the interest portion only.

So if the mortgage is €800 (€600 of which is interest) and you get rent of €1500, you actually pay tax on €1150. You also pay PRSI, usc.

You do have right off though, mortgage protection policy, building insurance, repairs and maintenance.

You cannot write off property tax or costs pre letting.

Sorry... I have to correct you too....

If €600 is interest then €450 is allowable and you pay tax on €1050,not €1150.

;-)

Gumbo

exaisle wrote: »

Sorry... I have to correct you too....

If €600 is interest then €450 is allowable and you pay tax on €1050,not €1150.

;-)

Yeah, that's a typo from using tablets. Principle advice is the same

newacc2015

Other expenses are wear and tear. Irish tenants moan about how low quality everything is in Irish properties. But you could get a €800 mattress from Arnotts and the tenant decides that they dont want to use a mattress protector on it. When they move out you are left with a mattress that is too stained to be given to another tenant. I imagine a landlord spends about €1k on wear and tear/ decorating per year(obviously more for large houses)

Insurance is a big expense. If you have several students in a house, you could be looking at insurance of around €600-850 per year in Dublin. It is a fair amount less for professionals.

Accountancy fees can be €200-350 per property in Dublin

DubCount

If everything is going well, there are costs including management charges for apartments, insurance, repairs and maintenance and accountancy fees etc. The biggest cost is usually the mortgage. Revenue only allow 75% of mortgage interest (not mortgage payment) as a tax deduction so more than half of any excess of rent income over mortgage cost usually goes to that tax man.

The biggest cost to landlords usually comes if tenants stop paying rent. Its not uncommon for a landlord to have 18-24 months of mortgage and other costs with no income. In fact, there is usually additional solicitor costs. When this happens, they don't get 50% of the loss back in tax, because that loss can only be used against other rental income profits.

As a rule of thumb, half the rent will be profit and half of that will go in tax

_kookie

The rules really need to be changed or its not worth investing in property.
Why would anyone go into it under the current rules. They would be nuts.
As stated in many posts above the downsides and risk are absolutely huge for a landlord.

When the rules change so that you can get control of your property back straight away when someone stops paying rent or anything else detrimental to the property, then maybe it might be worth it again.

And I wont even mention the penal tax on landlords, which by the way is only passed on, on the double to the tenant anyway.
What you have at the moment is LLs passing on all the extra taxes they have been paying for several years. As soon as the market turned LLs were obligated to not only make up for this loss they had taken over the years, but to add a extra on as a sort of insurance premium for the next govt sponsored hand in their pockets.

exaisle

DubCount wrote: »

The biggest cost to landlords usually comes if tenants stop paying rent. Its not uncommon for a landlord to have 18-24 months of mortgage and other costs with no income. In fact, there is usually additional solicitor costs. When this happens, they don't get 50% of the loss back in tax, because that loss can only be used against other rental income profits.

But they can carry the loss forward against future Rental Income so they pay less tax on Rental profits in the subsequent year(s). Not much use when you're several grand out of pocket and the mortgage company is looking for their pound of flesh though...

_kookie

_kookie wrote: »

The rules really need to be changed or its not worth investing in property.
Why would anyone go into it under the current rules. They would be nuts.

I have a feeling that the majority of Landlords in Ireland are either accidental landlords or CGT trapped landlords (landlords who bought 20 or 30 years ago and cant stomach the CGT bill if they sell so just simply continue to rent). Neither have an incentive to develop the business and dealing with tenants has simply become a chore for them.

Thestart

FYI.
100% tax relief is only applicable after renting to social tenants if you rent for 3 years in a row.
Your accountant takes account for the extra 25% for the 3 years and only after 3 years you can get the benefit.

CiniO

What is situation on income tax and PRSI on landlord who has no other income?
Can he/she use their personal tax credits?

F.e. Rent is €1000 per month, so €12,000 per annum.
Expanses on maintenance, etc - €2000.
Tax to be paid on €10,000 so.
At standard rate 20% it's €2,000.
But personal tax credit is €1650, so should be only €350 to be paid in tax.
Am I right?

What about PRSI and USC?

Gumbo

CiniO wrote: »

What is situation on income tax and PRSI on landlord who has no other income?
Can he/she use their personal tax credits?

F.e. Rent is €1000 per month, so €12,000 per annum.
Expanses on maintenance, etc - €2000.
Tax to be paid on €10,000 so.
At standard rate 20% it's €2,000.
But personal tax credit is €1650, so should be only €350 to be paid in tax.
Am I right?

What about PRSI and USC?

Yes, the rental income can be offset against their normal credits etc but your figures are wrong.
USC payable on the full amount though. An accountant is only €250 and is tax deductible and well worth their fee.

_kookie

kceire wrote: »

Yes, the rental income can be offset against their normal credits etc but your figures are wrong.
USC payable on the full amount though. An accountant is only €250 and is tax deductible and well worth their fee.

Where do you get an accountant for €250? :eek:
Mine is €375.
Do tell.

Gumbo

_kookie wrote: »

Where do you get an accountant for €250? :eek:
Mine is €375.
Do tell.

That's for a bog standard one rental return. May be more for more complex returns. I had every receipt and an excel document with all outgoings and incomings so it was well laid out for him.


Edit - Company removed and name sent by PM.
Apologies athtrasna.

_kookie

kceire wrote: »

<mod snip>
That's for a bog standard one rental return. May be more for more complex returns. I had every receipt and an excel document with all outgoings and incomings so it was well laid out for him.

Thanks, You may have saved me a small fortune

Got the dreaded form 11 in the post a couple of weeks ago and was about to call my accountant to fill it in.

Thargor

What about the Rent a Room scheme if you own the house and live in it with the tenants while paying a mortgage? (And you have a PAYE job aswell?)

athtrasna

Thargor wrote: »

What about the Rent a Room scheme if you own the house and live in it with the tenants while paying a mortgage? (And you have a PAYE job aswell?)

As long as all income from licensee(s) doesn't exceed 12k income is tax free.

Thargor

Thanks. Does it tip your PAYE income over into a higher bracket or anything like that or is it just free money no catch? (apart from having people in your house...)

athtrasna

Thargor wrote: »

Thanks. Does it tip your PAYE income over into a higher bracket or anything like that or is it just free money no catch? (apart from having people in your house...)

No, doesn't affect your PAYE

Hollister11

_kookie wrote: »

Where do you get an accountant for €250? :eek:
Mine is €375.
Do tell.

My parents is €450

4ensic15

athtrasna wrote: »

As long as all income from licensee(s) doesn't exceed 12k income is tax free.

It is possible to have income from tenants under that scheme as well.

athtrasna

4ensic15 wrote: »

It is possible to have income from tenants under that scheme as well.

That debate has been done to death on here this week and is not relevant to the question I was answering.

DubCount

4ensic15 wrote: »

It is possible to have income from tenants under that scheme as well.

I don't think that is correct. The scheme only applies to renting a room/rooms in your principal private residence (i.e. a licensee arrangement). It doesn't apply to holiday homes, apartments in the same grounds as your home, or any property which is self contained and could be rented to a tenant.

Claw Hammer

DubCount wrote: »

I don't think that is correct. The scheme only applies to renting a room/rooms in your principal private residence (i.e. a licensee arrangement). It doesn't apply to holiday homes, apartments in the same grounds as your home, or any property which is self contained and could be rented to a tenant.

The revenue allow it in the case of a self-contained apartment in the same building as the landlords residence.
"From Revenue.ie
4.2 Self-contained unit
It is not possible to let an entire residence because the room or rooms that are let must form part of the residence and the residence must be occupied by the individual receiving the rent as his/her sole or main residence. The room or rooms can comprise a self-contained unit within the residence such as a basement flat or a converted garage attached to the residence. However, a self-contained unit that is adjacent to the
residence but not actually attached to it cannot qualify for the relief."

The occupants of such a self-contained unit which does qualify would be tenants as opposed to licencees.

TheDoc

_kookie wrote: »

The rules really need to be changed or its not worth investing in property.
Why would anyone go into it under the current rules. They would be nuts.
As stated in many posts above the downsides and risk are absolutely huge for a landlord.

Then they need not go in. No one is forcing landlords to be landlords. Maybe it would provide the major kick up the hole this country needs in order to sort the rental market out once and for all, and stop it being a parody of the wild west.

And I'd imagine like all markets the major returns are for those who have multiple properties ticking over. I'd imagine the main reason for anyone to become a landlord, with only one property, is that you are hoping to either have a tangible asset for your children later in life, or you have an investment you can sell with hopefully profit for a tidy retirement lump.

I know from any landlords I've dealt with, that was their aim anyway. Something for the kids or for their own retirement. And I've tried sticking to those landlord types as they seem to work out the best. They want little to no hassle, and want someone who is going to treat their investment as a home.

Any issues I come across from friends or family with landlords, its always a management company, or a landlord looking to just make instant returns.

If someone handed me 400k tomorrow probably the last thing I'd so is become a landlord. There is no doubt that loads of people during the Celtic Tiger lost the run of themselves and saw becoming a landlord as a quick way to make $$$.

But at the same time, if I knew what I was expecting and getting into and was clear on everything, it's probably a relatively safe longterm investment. Looking at even this thread, clearly there are landlords posting, in conflict with each other on how the tax works So maybe people unequipped and poorly informed are best advised staying away from the market