Accidental landlord feeling the pressure

Kate253

I don't know what to do about my rented house. I am an accidental landlord as I needed to move and couldn't sell my home due to negative equity so I now private rent myself and have rented out my home.

The tax I have to pay on the property is killing me. I made 8400 rent in 2015 and have to pay almost 5K in tax for that year. I thought I had paid it -2500 approx but got a letter this week saying there is 2,500 outstanding due for that year. (Why I am only getting notice of this now is beyond me as I have paid my 2016 tax) . I am wating on a callback from revenue but am assuming that I have been heavily penalised if theya re seking this money due from 2015 but I got no other correspondence in post about this owed money til now!

I still have to pay the mortgage which is 800/mth plus my own rent. I am aware that I should have raised my rent 2 years ago when the rents shot up but I wasn't paying attention and was glad to have regular tenants. I put rent up a measly 100/month after a haggle by tenants last year - again to keep the people i had even though they are paying WELL below market rent. I didn't really factor in the cost on me with tax.

I thought in 2015 I was exempt from having to pay preliminary tax for the next year becuase of the rent ceiling. I did pay preliminary tax last year for this year but it's a killer. It's one thing to receive X rent and then pay back tax afterwards but to pay in advance is v unfair as I don't have that cushion. So I see myself borrowing money to pay some of my tax every year.

So for the 700/ rent / month I g0t that year, I paid 800mth for my mortgage and still have to pay 400 approx tax on that month. This I had got my head around but I can't believe I have to also pay the same amount in advance for the following year. Therefore at end tax year, I pay approx 800/month tax which is more than the rent I collect and before I actually pay the mortgage!

If I were to sell my home today, I would be down about 50K. I don;t know if I will ever get close to what I paid for the house so maybe I'm mad to see that as a reason not to sell. I feel I'm losing money on this house!

I can't raise the rent again til early next year. Am I right to be ruthless and raise the rent to near market price to better cover my costs? I don't want to do that to the family but I'm not exactly rolling in money either! besides, the more rent I collect, the more tax???

Any advice?

GhostyMcGhost

If your in an RPZ then 4% max so from €800 to €832

The fact it was increased last year and you said you need to wait until next year suggests it's not in an RPZ but would that be likely to change ? The list of towns added has been changed already and your town could be next on the list

Kate253

GhostyMcGhost wrote: »

If your in an RPZ then 4% max so from €800 to €832

The fact it was increased last year and you said you need to wait until next year suggests it's not in an RPZ but would that be likely to change ? The list of towns added has been changed already and your town could be next on the list

Jaysus. I have had my eye so off the ball. I can see why every other landlord hiked their rents up extortionately last year! I just wanted security of good tenants but it is seriously costing me! ( Goes to google RPZ)

webpal

Talk to an accountant. That sounds like a lot of tax. Are you using all of your tax allowables?

Kate253

webpal wrote: »

Talk to an accountant. That sounds like a lot of tax. Are you using all of your tax allowables?

I think I am going to have to. This is beyond me.

amcalester

Do you have the option of moving back in and availing of the rent a room scheme? It allows you up to €14k in rent from lodgers tax free.

Kate253

Kate253 wrote: »

................

I thought in 2015 I was exempt from having to pay preliminary tax for the next year becuase of the rent ceiling. ................

?

Why are you paying that?

Kate253

amcalester wrote: »

Do you have the option of moving back in and availing of the rent a room scheme? It allows you up to €14k in rent from lodgers tax free.

Most definitely not. I moved to another part of the country.

Kate253

Augeo wrote: »

?

Why are you paying that?

Thats what I've been told to do! That I need to pay 90% of the projected tax for the following year.

Kate253

Kate253 wrote: »

Jaysus. I have had my eye so off the ball. I can see why every other landlord hiked their rents up extortionately last year! I just wanted security of good tenants but it is seriously costing me! ( Goes to google RPZ)

Nope. At least that's something! I may need to get with the real world next lease.

BetsyEllen

What is RPZ?

Kate253

BetsyEllen wrote: »

What is RPZ?

residential pressure zone. yeah, didn't know either and I'm a landlord!

webpal

Augeo wrote: »

?

Why are you paying that?

If you earn over x amount on rental income, you have to register for income tax (even though you may be a PAYE earner too). You have until 31 October to pay for the previous years tax and 90% for current year

pwurple

Is this your first year paying tax on it? Does that include preliminary? You're paying two years of it there if so. 
I have chosen not to pay preliminary tax sometimes in the past, and paid it the following year instead. For example I did it any years I had a baby. there just wasn't money available when I couldn't work and had only mat benefit (taxed) to support us on.

Kate253

pwurple wrote: »

Is this your first year paying tax on it? Does that include preliminary? You're paying two years of it there if so.
I have chosen not to pay preliminary tax sometimes in the past, and paid it the following year instead. For example I did it any years I had a baby. there just wasn't money available when I couldn't work and had only mat benefit (taxed) to support us on.

Can you do that? it appears that I didn't pay my preliminary tax in 2015 and they are after me for it now.

Maldesu

Kate253 wrote: »

I made 8400 rent in 2015 and have to pay almost 5K in tax for that year. I thought I had paid it -2500 approx but got a letter this week saying there is 2,500 outstanding due for that year. (Why I am only getting notice of this now is beyond me as I have paid my 2016 tax) . I am wating on a callback from revenue but am assuming that I have been heavily penalised if theya re seking this money due from 2015 but I got no other correspondence in post about this owed money til now!


Any advice?

You should probably speak to a tax consultant, because a figure of 5k of tax on 8400 rent for one year is nuts. It's only your profits that should be getting taxed and that rate it 20% (iirc).

I'd suggest you read the letter carefully and check if they assuming you have been renting before 2015. In rental cases, Revenue can look back for 4 years and 5k would be close to what the tax would be over that period.

dudara

You need to get proper advice here. A good advisor will help you reduce your tax bill by deducting legitimate expenses.

CIARAN_BOYLE

Kate253 wrote: »

Can you do that? it appears that I didn't pay my preliminary tax in 2015 and they are after me for it now.

if your 2015 pt was the problem you would have had a larger 2016 bill. have you an accountant. if so go to him. if not get one.

Kate253

Thanks all.

webpal

webpal wrote: »

If you earn over x amount on rental income, you have to register for income tax (even though you may be a PAYE earner too). You have until 31 October to pay for the previous years tax and 90% for current year

Yeah but the OP is referring to paying for the next year, not the current one......"I thought in 2015 I was exempt from having to pay preliminary tax for the next year becuase of the rent ceiling."

Kingp35

Maldesu wrote: »

You should probably speak to a tax consultant, because a figure of 5k of tax on 8400 rent for one year is nuts. It's only your profits that should be getting taxed and that rate it 20% (iirc).

It's taxed at your marginal rate + USC & PRSI.

As already stated by others, speak to an accountant.