Renting out a house while abroad

araic88

I'm planning to go on a working holiday for a year in August & to rent out my house while away.
When I enquired about the possible income, an estate agent estimated it would rent for €1000-1100 a month, before the fees etc. of going with an agency.
I had thought this would be tax free, as it doesn't exceed the €14000 annual figure I had read about. However, on reading again maybe this doesn't count? As the "Rent a Room" scheme or however they called it.

Would I have to pay tax on the income? How much should I expect it to be? Would renting out rooms individually avoid this? (I'd rather not though)

handlemaster

araic88 wrote: »

I'm planning to go on a working holiday for a year in August & to rent out my house while away.
When I enquired about the possible income, an estate agent estimated it would rent for €1000-1100 a month, before the fees etc. of going with an agency.
I had thought this would be tax free, as it doesn't exceed the €14000 annual figure I had read about. However, on reading again maybe this doesn't count? As the "Rent a Room" scheme or however they called it.

Would I have to pay tax on the income? How much should I expect it to be? Would renting out rooms individually avoid this? (I'd rather not though)

accountant will tell you. welcome to high tax and high risk

FishOnABike

Have a read of the residential tenancy act (including recent amendments) and get some good legal and financial advice to make sure you are well informed on all the pros and cons.

If it is in an area of high demand and you know someone who could caretake the house for you would air bnb be worth considering (although there may be planning implications around change of use depending on circumstances).

jimmycrackcorm

You can't do the rent a room as you need to be living there. You also have the complication of earning foreign income and having to to a tax return when you come back.

You would actually be better to get a family member to move in and get them to do the rent a room scheme and spend the tax free income on doing up the house.

dev_ire

jimmycrackcorm wrote: »

You can't do the rent a room as you need to be living there. You also have the complication of earning foreign income and having to to a tax return when you come back.

You would actually be better to get a family member to move in and get them to do the rent a room scheme and spend the tax free income on doing up the house.

How would that work? Surely that is just dodging tax?

Franz Von Peppercorn

araic88 wrote: »

I'm planning to go on a working holiday for a year in August & to rent out my house while away.
When I enquired about the possible income, an estate agent estimated it would rent for €1000-1100 a month, before the fees etc. of going with an agency.
I had thought this would be tax free, as it doesn't exceed the €14000 annual figure I had read about. However, on reading again maybe this doesn't count? As the "Rent a Room" scheme or however they called it.

Would I have to pay tax on the income? How much should I expect it to be? Would renting out rooms individually avoid this? (I'd rather not though)

Are you intending to pay tax where you work or are you moving around?

If you are moving around and aren’t in one place for the year you are domiciled here. That means the house is your ppr but you owe income tax here.

araic88

Franz Von Peppercorn wrote: »

Are you intending to pay tax where you work or are you moving around?

If you are moving around and aren’t in one place for the year you are domiciled here. That means the house is your ppr but you owe income tax here.

A little of both?! I hope to travel a small bit, perhaps work a few different jobs but I would be paying tax on those.
Can I still rent out the whole house if domiciled here? How would I declare tax from foreign income?

James Bond Junior

I am interested in this as I plan to move away in the mid future and rent my house while I am gone. I will only be renting it for 9 months (college term) and staying there for July and a good chunk of August. Would I also be liable for income tax on income earned abroad?

Isnt the tenant supposed to withhold tax if the landlord is abroad?
then you get credit for it on your tax return

https://www.revenue.ie/en/property/rental-income/irish-rental-income/how-do-you-declare-your-rental-income.aspx

Franz Von Peppercorn

bluewolf wrote: »

Isnt the tenant supposed to withhold tax if the landlord is abroad?
then you get credit for it on your tax return

https://www.revenue.ie/en/property/rental-income/irish-rental-income/how-do-you-declare-your-rental-income.aspx

Yes. In theory you should declare the rent where you pay income tax where resident.

Franz Von Peppercorn

araic88 wrote: »

A little of both?! I hope to travel a small bit, perhaps work a few different jobs but I would be paying tax on those.
Can I still rent out the whole house if domiciled here? How would I declare tax from foreign income?

If you are working in one country for a year you will pay income tax there.

20% will de deducted here at source. In theory you should declare the income in Canada and get credit for the 20%. However I don’t know if the Canadian authorities are really that diligent.

relax carry on

Ireland retains taxation rights over your rental income as the property is situated in the state. You must declare your rental income here in your annual tax return.

You can then declare it in your tax return in the country you have moved to but the tax is paid here.

Either get an agent to register and do it for you or have the tenants deduct 20% of the rent and remit it to the Irish Revenue.

FishOnABike

James Bond Junior wrote: »

I am interested in this as I plan to move away in the mid future and rent my house while I am gone. I will only be renting it for 9 months (college term) and staying there for July and a good chunk of August. Would I also be liable for income tax on income earned abroad?

And when they have part iv rights after 6 months. You will need to ensure valid notice (35 days for a tenancy between 6 and 12 months), reason for termination and any other obligations are met and hope the tenant does not raise a dispute with the RTB regarding the termination or simply overhold.

James Bond Junior

FishOnABike wrote: »

And when they have part iv rights after 6 months. You will need to ensure valid notice (35 days for a tenancy between 6 and 12 months), reason for termination and any other obligations are met and hope the tenant does not raise a dispute with the RTB regarding the termination or simply overhold.

I am a 5 min walk to an over subscribed university so plan to rent to students which will hopefully negate the chance of that occuring.

dennyk

dev_ire wrote: »

How would that work? Surely that is just dodging tax?

More or less. It would be legal for the tenant family member living in the property to take on a subletter licensee who paid them rent and then claim relief on those rent payments via the Rent-a-Room scheme, but if the rent payment is going to the absentee homeowner instead of to the family member who actually lives in the house, that wouldn't be kosher.

dev_ire

dennyk wrote: »

More or less. It would be legal for the tenant family member living in the property to take on a subletter licensee who paid them rent and then claim relief on those rent payments via the Rent-a-Room scheme, but if the rent payment is going to the absentee homeowner instead of to the family member who actually lives in the house, that wouldn't be kosher.

So if it just covered the mortgage it would be ok?

jimmycrackcorm

dev_ire wrote:

How would that work? Surely that is just dodging tax?

It's completely legal.

dennyk wrote:

More or less. It would be legal for the tenant family member living in the property to take on a subletter licensee who paid them rent and then claim relief on those rent payments via the Rent-a-Room scheme, but if the rent payment is going to the absentee homeowner instead of to the family member who actually lives in the house, that wouldn't be kosher.

I never suggested it would go to the owner. I know someone who rented a house in poor condition at a cheap rent from an unrelated landlord. They painted it up and did a lot of garden maintenance because they wanted to live in a nice place. When they moved out, the landlord benefited from the improvement.

dev_ire

jimmycrackcorm wrote: »

It's completely legal.



I never suggested it would go to the owner. I know someone who rented a house in poor condition at a cheap rent from an unrelated landlord. They painted it up and did a lot of garden maintenance because they wanted to live in a nice place. When they moved out, the landlord benefited from the improvement.

So how does it work? The house stays in the name of the person living abroad and they get someone to live in the house and collect the rent and declare it as if they are owner-occupiers claiming up to 14,000 tax free?

Franz Von Peppercorn

dev_ire wrote: »

So how does it work? The house stays in the name of the person living abroad and they get someone to live in the house and collect the rent and declare it as if they are owner-occupiers claiming up to 14,000 tax free?

tenants can sublet. And the relative can gift money. I think that’s the idea.

dev_ire

Has anyone actually done this and declared it fully and seen it is taken as legit or is it taking a huge risk?

Franz Von Peppercorn

dev_ire wrote: »

Has anyone actually done this and declared it fully and seen it is taken as legit or is it taking a huge risk?

I’m just guessing what the idea is. However if you

1) rent at a nominal rent to a close relative you only declare 20% on that low rent. I’m sure there’s no benefit in kind there or most Dubliners who live at home would be taxed.
2) the renter can sub let and make a tax free sum of 14k.
3) he can gift it to you. That’s clearly the risky part. The tax on the gift depends on how close the relative is.

Michael D Not Higgins

Any reduction in the rent would be considered a gift under CAT. Tax would be liable on the gift above the threshold.

The rent collected would be tax free up to 14k but would need to be declared to Revenue.

Gifting the rent back again to the owner would then also attract CAT above the threshold.

Assuming all is done above board, Revenue would have a record of the tax paid on the rent the relative paid, the amount of rent-a-room collected and the amount gifted back to the owner. It would look bad in their eyes to abuse these schemes to avoid tax due.

dev_ire

So best to assume you pay 20% or higher tax as normal income to be safe?

Franz Von Peppercorn

Michael D Not Higgins wrote: »

Any reduction in the rent would be considered a gift under CAT. Tax would be liable on the gift above the threshold.

How many people are ever taxed on that? What about adult children living at home? Anyway the threshold is 16k for distant relatives. So it’s a matter of subtracting that from the market rent.

The rent collected would be tax free up to 14k but would need to be declared to Revenue.

Nobody disputes that.

Gifting the rent back again to the owner would then also attract CAT above the threshold.

16k is the threshold for distant relatives. It’s 310k for the closest relatives. That’s over a lifetime.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx

Assuming all is done above board, Revenue would have a record of the tax paid on the rent the relative paid, the amount of rent-a-room collected and the amount gifted back to the owner. It would look bad in their eyes to abuse these schemes to avoid tax due.

It would be a use of a loophole. You could call them up and tell them about the scheme. They may not like it but the opportunity exists because of those two anomalies - the gift thresholds and the room rent tax free law.

PhoenixParker

People are going down weird and complex rabbit holes that are probably completely unnecessary and irrelevant.

The solution for your case will depend on a few factors like exactly what dates you're gone, where you're going, how much you earn this year in Ireland before you go, how much you earn abroad etc.


Look up revenue.ie for tax residency rules and ordinary residency and the specific rules of rent a room and taxation arrangements with the country you're going to. Also familiarise yourself with the PAYE cut offs.

Then it's time to do some scenario analysis:

If you do it as rent a room and it's your main residence for the tax year then you're ok up to 14k, and if you're there til August this year, then that should qualify. If you haven't earned much so far this year then it may be more profitable to simply rent it for as much as you can get.


Next year wouldn't qualify as rent a room unless you come back early but then how much are you planning to earn in Ireland next year?

Etc

dev_ire

So is it best to think you will pay 50% of your rent over to tax and letting agents if you don't live in the house for most of the year?

PhoenixParker

dev_ire wrote: »

So is it best to think you will pay 50% of your rent over to tax and letting agents if you don't live in the house for most of the year?

It depends on your other income.
You may pay no tax.

dev_ire

If you are the higher rate of income tax is that a decent ballpark figure to think?

CiniO

What about standard renting and tax credits?

I.e. if OP would rent a property for €1000 a month, that's €12,000 per annum.
Assuming OP has no other income in the state, that's 20% tax on €12,000 - which is €2,400. But personal tax credit is €1650, so only €750 of tax to be paid.

Is that correct, or am I making some mistake here?

Franz Von Peppercorn

CiniO wrote: »

What about standard renting and tax credits?

I.e. if OP would rent a property for €1000 a month, that's €12,000 per annum.
Assuming OP has no other income in the state, that's 20% tax on €12,000 - which is €2,400. But personal tax credit is €1650, so only €750 of tax to be paid.

Is that correct, or am I making some mistake here?

That’s an exemption that doesn’t apply to people outside the state. He should however declare his income in Canada.

I wouldn't discount it falling under the rent a room scheme as fast as some. You are on a working holiday and will be moving around no doubt not so different to a sales rep living in hotels, it's still your PPR so if you just rent spare rooms and keep your own room, call home now and again I don't see why the rent a room scheme should not be considered possible at the very least.

I'm not advising you to break any rules but it's at least worth talking with a good accountant who knows how to manage tax affairs to see if it could be worked in your favour.

CiniO

Franz Von Peppercorn wrote: »

That’s an exemption that doesn’t apply to people outside the state. He should however declare his income in Canada.

So you're saying that personal tax credit is not available for people who are not resident in Ireland?

Franz Von Peppercorn

CiniO wrote: »

So you're saying that personal tax credit is not available for people who are not resident in Ireland?

Yes for rent. The tenant or the agent is obliged to pay.

Bubbaclaus

Reading this thread is like Class 101 of inaccurate tax advice

dev_ire

Bubbaclaus wrote: »

Reading this thread is like Class 101 of inaccurate tax advice

Very helpful.

acdublin

I've a similar (ish) query to this that I've tried to have answered before but with no success. If I'm required by work to live in my employer's property (let's call me a caretaker on a large estate), may I avail of rent-a-room scheme in my PPR, even though I never sleep there myself? If I get sacked, my PPR is the only house I have to live in. Also, can someone point me in the direction of a really good tax accountant on these matters? Thanks, ac

dennyk

acdublin wrote: »

I've a similar (ish) query to this that I've tried to have answered before but with no success. If I'm required by work to live in my employer's property (let's call me a caretaker on a large estate), may I avail of rent-a-room scheme in my PPR, even though I never sleep there myself? If I get sacked, my PPR is the only house I have to live in. Also, can someone point me in the direction of a really good tax accountant on these matters? Thanks, ac

Most likely not, if you "never" sleep there; if the property you own is not where you ordinarily reside for the majority of the year and where people looking for you "at home" would normally expect to find you, it would not usually qualify as your PPR for the purposes of the rent-a-room scheme.

acdublin

dennyk wrote: »

it would not usually qualify as your PPR for the purposes of the rent-a-room scheme.

I know that I'm able to designate this house we own but don't sleep in as our PPR. Under the rules for Capital Gains Tax, there's specific mention of being allowed to call something else your PPR when you are required to live in an employer's residence for the purpose of work. This house is exempt from CGT as it's your PPR. That is not in dispute.

However, can the Revenue count something as your PPR and apply certain benefits to you (say CGT exemption) but not others (say Rent-a-Room relief)?

Many thanks, ac