Tax liability to Landlord

Faze11

Hi all

We will be moving out of the county we have our house in in the next 3 months due to work. We are accidental landlords you could say. I am a little bit green when it comes to this kind of thing but want to be sure we are doing everything by the book in terms of our tax liability.

If the market rent is 1400 euro a month and we charge this how much of that should we expect to hold back for tax? The mortgage we have on property and paying each month is 900 euro. Anything I can claim on legitimately in order to reduce this?

Many thanks for any advice related to tax.

L1011

Wrote a reply reading county as country and was giving details for non-residents, withholding tax etc. Oops.

You can claim the mortgage interest as an expense, as well as other valid expenses. Buying physical things for the house usually counts as capital which is written down over 8 years at 12.5% a year. You can't claim for pre-letting expenses except for long-term vacant properties which this isn't.

Assuming no other expenses, rough tax is likely to be half the rent minus your mortgage interest. If you are claiming MIR/TRS for a pre-2013 mortgage, you do not qualify when renting it out and should advise Revenue immediately upon letting to avoid trouble later.

boege

Rental income is treated like salary and taxed similarly. Tax is calculated (roughly) as follows:

Net Rent = gross rent minus expenses. Revenue web site has full details on allowable expenses.

USC is paid on Net Rent. The Net Rent is added to any other PAYE income in order to calculate.

Taxable Rent = Net Rent less depreciation of capital items (the movable parts).

PAYE tax is paid on Taxable rent, again add Taxable Rent to other PAYE income in order to calculate.

PRSI I am a little unsure about.

My advice is take tax advice before doing anything. There are things you can do before renting that can your reduce your future tax liability.

Gumbo

Faze11 wrote: »

Hi all

We will be moving out of the county we have our house in in the next 3 months due to work. We are accidental landlords you could say. I am a little bit green when it comes to this kind of thing but want to be sure we are doing everything by the book in terms of our tax liability.

If the market rent is 1400 euro a month and we charge this how much of that should we expect to hold back for tax? The mortgage we have on property and paying each month is 900 euro. Anything I can claim on legitimately in order to reduce this?

Many thanks for any advice related to tax.

If you receive 1400, rule of thumb is to keep half for the tax bill.

You can reduce this then through expenses, costs etc
A decent accountant can guide you and his/her fees are tax deductible.

relax carry on

Apologies, my tired eyes saw country not county.

Caranica

relax carry on wrote: »

Also remember you'll be a non resident landlord so have an additional tax obligation around appointing an agent.

If you are a non resident landlord you can claim a credit for the tax deducted by your tenant. You must submit a Form R185 with your tax return to claim this. You may choose to use the services of a rent collection agent. They will be an Irish resident who collects the rent and files your income tax on your behalf. If you use an agent your tenant will not have to deduct tax from the rent paid to the agent.

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

OP said different COUNTY not COUNTRY

relax carry on

Caranica wrote: »

OP said different COUNTY not COUNTRY

Oops, tired brain.

Samuel T. Cogley

Sorry not quite getting the OP. If this is for 3 months don't go down a full lease route, AirBnB until June (New laws come in). Tenants can and do overhold.

Glenbhoy

Faze11 wrote: »

Hi all

We will be moving out of the county we have our house in in the next 3 months due to work. We are accidental landlords you could say. I am a little bit green when it comes to this kind of thing but want to be sure we are doing everything by the book in terms of our tax liability.

If the market rent is 1400 euro a month and we charge this how much of that should we expect to hold back for tax? The mortgage we have on property and paying each month is 900 euro. Anything I can claim on legitimately in order to reduce this?

Many thanks for any advice related to tax.

Safest thing is to assume 50% will be tax, it will eventually work out less than that, but better to have it ready than to try and find it when needed. The most important factor will be the interest on the loan as that will be your main deductible. I'm assuming you're both top rate taxpayers here, if that's not the case, there could be additional substantial savings.

Samuel T. Cogley

Samuel T. Cogley wrote: »

Sorry not quite getting the OP. If this is for 3 months don't go down a full lease route, AirBnB until June (New laws come in). Tenants can and do overhold.

Moving in three months not for three months.

the_syco

Faze11 wrote: »

We will be moving out of the county we have our house in in the next 3 months due to work.

Do you intend on moving back? If not, are you in negative equity?

The_Conductor

Do you ever need to move back into the property again?

Rough rule of thumb.

Gross rental income- you pay USC (not the net).
From the remainder- deduct allowable expenses (the biggest one is obviously your mortgage interest- note- it is *only* the interest- not the mortgage payment itself- only the interest).
You aren't going to have a net from which you can deduct depreciables- in all probability- though it would be worth exploring (they're flat lined at 12.5% per annum).
The remainder- after you manage to deduct all allowable costs- is taxed at your marginal rate of taxation (which is probably late 40s%)

The big allowable cost for you- is your mortgage interest- which is 90% allowable.

Also- get a good run down from an accountant for year 1- their fees are tax deductible- its well worth using them the first year.

Fian

Also bear in mind that your mortgage agreement may prohibit this course of action, or prohibit it without notice to your lender. Buy to let mortgages generally operate at a significantly higher interest rate than PDH mortgages.

you cannot write off your full mortgage payment against your taxes. You can only write off the interest portion of the payments. I may be wrong but i think this year it has moved to 90% of interest payment can be deducted? it is moving towards 100% of interest being deductible.

as stated above keeping half of the rent and setting it aside to meet your tax bill is a good rule of thumb.

you can also claim capital allowances against the white goods/furniture etc at 12.5% per annum.

Faze11

Thanks you all. Appreciate all of the information.

Faze11

Factoring tax etc would it be fair to say that if I have to buy a washing machine for 500 euro that ultimately it is costing me that less tax. I.e maybe 300 euro approx as I can claim against it?

The_Conductor

Faze11 wrote: »

Factoring tax etc would it be fair to say that if I have to buy a washing machine for 500 euro that ultimately it is costing me that less tax. I.e maybe 300 euro approx as I can claim against it?

You can't charge it as an allowable cost upfront- you have to depreciate it on a flatline basis over 8 years. Aka- if the washing machine costs 1,000 - the allowable cost for each of the next 8 years is 125 Euro per year. This is why is so damn important to keep receipts and really really really good records.

Faze11

The_Conductor wrote: »

You can't charge it as an allowable cost upfront- you have to depreciate it on a flatline basis over 8 years. Aka- if the washing machine costs 1,000 - the allowable cost for each of the next 8 years is 125 Euro per year. This is why is so damn important to keep receipts and really really really good records.

Ah I see now and this was mentioned earlier. A lot clearer now. Thanks Conductor.