I'm moving in with my partner and I'm going to rent my home out.
My mortgage is 750 per month and i would easily be able to rent this house for 2000 per month.
Would I have to pay tax on all 2000 or only on the profit after the mortgage payment?
My salary already puts me in the 40% bracket.
Any advice would be very much applicated.
Only the mortgage interest is tax deductible. The capital element of the repayments is not allowable.
Your bank is likely to increase the interest rate when you move from home owner to landlord.
There will be implications if you rent it out and then sell, in terms of Capital Gains Tax (CGT).
Any advice..... dont do it. Just sell up and invest your profit in something else. Landlording is not an easy way to make money any more. Much better return to be had adding money to pensions etc.
Go talk to a financial advisor - best money you will ever spend.
The mortgage repayment is not relevant to calculating rental profits.
The mortgage interest payment is relevant.
Tax is paid on net rental profits.
Rental profit = gross rent minus allowable deductions.
One of the allowable deductions is mortgage interest.
There are other allowable deductions.
Obviously, you should have a detailed knowledge of what expenses are allowable or not, before you become a landlord.
You need to seriously think about this move.
Landlords are leaving in droves due to a number of things. Tax USC on income.
You are responsible for any antisocial behaviour made by your tenants. Your neighbours could get compensation due to your tenants. If you have a good relationship with them you may not have after a few months. It is difficult to get tenants out of your property if they do not pay the rent. It can take years to remove them.
You have to a tax return each year and pay preliminary tax(pay tax on expected income for the following year ahead!) so double in the first year.
You pay tax in the rent only after the interest on the mortgage is paid. You also pay USC on rent. You can only increase by 2% or less if in a rent pressure zone.
A tenant has the right to stay indefinately from June this year after 6months rental. If SF get in then they are pushing to make it that you can only sell the house with the tenant in situ. Banks only give mortgages for vacant properties so limited buyers there.
What if the tenant does not pay? Do you have the funds to pay the mortgage on the property as well as other charges? Property tax cannot be used to reduce your tax bill. You have to pay a yearly registration to RTB now. All adds up.
As stated above you will pay higher house insurance, higher mortgage rate as the house changes to btl. If you are on a lower tracker you could loose that too. You could get calls saying the sink is blocked, washing machine broken, etc. Had one tenant tell me the door bell did not work because they did not want to buy a battery. Another told me the bulb had gone in sitting room. Had another ring me as they locked themselves out and if I could let them in!!
Your house has to be up to code for rental and if your tenant is on HAP then the inspection could mean you need to put vents in, piped extractor from the kitchen and all could be very expensive.
When you sell you pay CGT on the difference of the price of the house purchased and the selling minus costs. A percentage deducted for the time you lived there. 33% handed to the tax man and then you have to clear the mortgage off if they is anything left at the end.
Suggest looking at RTB site for details of cases brought before them. Look at Revenue website and see what they say about rental income. Just have your eyes wide open when if you go down this route.