McGrath statement of tax changes for landlords. Same as last year. Will never happen.

Snopake

We are in a ludicrous situation where social housing tenants are able to earn €14k per year renting out rooms in the property that has been given to them by the state but small landlords are taxed at their marginal rate for all rent received

Emblematic

https://www.boards.ie/discussion/comment/121192849#Comment_121192849

Private homeowners are also able to avail of the rent a room scheme.

Snopake

Correct, but it’s an important distinction that those are houses that they purchased themselves. Maybe it’s just me but it seems odd to be that social housing recipients are able to make tax free money on something that has been given to them

o1s1n

https://www.boards.ie/discussion/comment/121192849#Comment_121192849

'The Rent-a-Room Scheme permits an individual to rent a room or rooms in their home, retain their social welfare entitlements where applicable, and earn up to €14,000 in rental income free from tax liability. The scheme is open to homeowners and also primary tenants who may have a spare room in their rented property.'

I understand the need to offer schemes like this to get more rooms available to rent, but it does seem nuts to think a person can hypothetically stay on social welfare not working, get a social house, rent a room out in that house and earn more than a landlord operating a business renting out an apartment.

Ginger83

https://www.boards.ie/discussion/comment/121191861#Comment_121191861

Yes you are right but the councils don't want this problem which is part of the reason it takes so long to evict.

Grumpypants

Looks to be a stepped relief if you keep it in the market. €3,000 this year, 4 next and 5 the year after will be taxed at the 20% mark. But if you sell they will claw it back.

If I understand it correctly was trying to follow along on the radio.

Tombo2001

How is it verified 'kept in the market'. Probably need to get some inspection done that will end up costing more than the relief.

SharkMX

https://www.boards.ie/discussion/comment/121218229#Comment_121218229

I dont see how that is going to keep any landlords in the market who were thinking of getting out. It most certainly is not going to attract any new ones anyway.

Grumpypants

I guess the real details will come out. But the €600 they will give would have been wiped out by the mortgage interest increase.

Mr Disco

What does it mean practically?

Grumpypants

https://www.boards.ie/discussion/comment/121218400#Comment_121218400

From Irish times.

Landlords will benefit from a tax break worth between €600 and €1,000, rising every year they stay in the market up to 2027. In the first year, €3,000 of income will be taxed at the standard 20 per cent rate rather than the higher rate (meaning €600 extra to the landlord), increasing to €4,000 in 2025 (a benefit of €800 in their pocket) and €5,000 for the subsequent two years (translating to the full €1,000).

o1s1n

https://www.boards.ie/discussion/comment/121218285#Comment_121218285

You can claim mortgage interest relief on a rental property to balance that interest rate increase out.

This plan they announced is fairly sound, the sums are however laughable.

Snopake

The amount is ridiculously low. The one positive is that at least there is clarity on the state of play for the next three years

Grumpypants

https://www.boards.ie/discussion/comment/121218465#Comment_121218465

I think that's only on your primary principal residence (the one you live in).

In my case my own house is on a fixed interest rate so I can't benefit from it as the rate didn't go up. And the rental property is on a tracker so even though it went up I can't claim that relief.

It helps the landlord that had no intention of selling a little bit.

But it does nothing for the landlord that was on the fence about selling. Do they sell now, take the benefits of a high market value and just get out.

Or risk the market not collapsing over the next 4 years as the world goes to pot, a recession takes hold, and supply comes on stream for the sake of €2400 tax relief. While likely forking out for the extra mortgage interest payments that will likely be multiples of that tax relief.

o1s1n

https://www.boards.ie/discussion/comment/121218607#Comment_121218607

Sorry I mean just in general re the mortgage interest relief on a rental property. Have a read of the 'what expenses are allowed' page on revenue.ie Irish rental income page.

Mortgage interest

You may be allowed claim Mortgage Interest Relief against your rental income. The interest must be from a mortgage that is used to purchase, improve or repair your rental property.

You can claim Mortgage Interest Relief if you are registered with the Residential Tenancies Board (RTB):

while your property is rented out

in between renting out the property as long as you do not live in it during that time.

You cannot claim Mortgage Interest between the time you buy the property and the time you first rent out the property.

Mortgage Interest Relief is restricted to a percentage of the interest as follows:

interest accrued on or after 7 April 2009 to 31 December 2016 75%

interest accrued from 1 January 2017 to 31 December 2017 80%

interest accrued from 1 January 2018 to 31 December 2018 85%

interest accrued from 1 January 2019 100%

Grumpypants

Even then I've to pay 2k extra on the mortgage to reduce the tax I pay by 1k. So still down €1,000. Reducing that by €600 is better than nothing, but not going to suddenly make me want to stay in the market.

If they wanted to keep landlords in the market then they should have just said don't pay tax on the first 3k.

Even getting your taxable amount under 5k means you can stay in the PAYE system just pay what you owe each year. And don't have to register for ROS and the additional hoop jumping that involves.

arctictree

It really is strange that a landlord gets the first 3K at 20% while the rent a room relief is no tax on the first 14K. You'd think they would want to encourage rental of full properties. I can only think that it is political. ie 14K to a householder renting a room looks good while similar to a big bad landlord would give the opposition lots to play with.

Subutai

The key difference is that they don't get the first 14k tax free. They get 14k tax free, and if they charge a euro over that the entire sum becomes taxable.

o1s1n

https://www.boards.ie/discussion/comment/121219266#Comment_121219266

I really do think that would be a great idea to do across the board with all rentals. Would cap the rent on a lot of places at 1,166 euro a month. Save a fortune for many a renter.

Donald Trump

https://www.boards.ie/discussion/comment/121222636#Comment_121222636

14k is all in price - i.e. including all contributions towards bills.

It's not realistic to expect a windfall for a landlord- essentially operating a business investment - to equate with an incentive to encourage someone to rent out spare room in their personal space.

You can concoct all the hypothetical edge cases under the sun, but for the vast vast majority it is an investment.

o1s1n

https://www.boards.ie/discussion/comment/121222764#Comment_121222764

It would be an incredibly generous offer to landlords and there would be riots in the streets if it happened, so there was no way it was ever going to happen. I don't think anyone genuinely thought it would.

I don't see what the current incentive is meant to achieve. Personally I'm staying in the market for the forseeable future so it's not really doing anything to alter my decision. If I was going to leave, a 600 euro tax credit wouldn't make me pause even for a split second to rethink the decision.

downtheroad

https://www.boards.ie/discussion/comment/121218285#Comment_121218285

The mortgage interest is an allowable expense to reduce the taxable rental profits.

spaceHopper

To me the long and the short of it is that the tax break is a token gesture, it's worth about 7 or 800 euros in the first year. One bad tenant can still wipe you out and they aren't going to address that. Then you still have the what SF might do when they come to power. Expect more LL's to sell up.

Donald Trump

https://www.boards.ie/discussion/comment/121223145#Comment_121223145

It's simply a handout to a certain category in society - most of whom wouldn't actually need it. And it would be a category that most politicians, if they don't fall into it themselves, would be moving in the circles of those who are

Grumpypants

https://www.boards.ie/discussion/comment/121223185#Comment_121223185

It's like your boss giving you a 2% rise when inflation is 7%. All the benefit just gets eaten up by the extra cost of living. Same here. €600 is worthless when your expenses have grown by the thousands.

Landlords were promised something last year and were ignored. They were promised significant help this year yet they are worse off year over year.

If the goal was to stop landlords leaving the market then it failed miserably.

SharkMX

Dont know why they bothered.

They would have been much better off getting a process in place to remove tenants who wont move out.

This is a pittance to a landlord compared to that. And no way is this going to attract new landlords into the market. It wont even get those who were on the fence to stay.

Grumpypants

https://www.boards.ie/discussion/comment/121223283#Comment_121223283

Exactly, zero incentive to stay. None of the problems addressed.

Renters get a bigger tax break.

Someone in a social house can rent out a room and get a better tax incentive (14k) than the person that rents the whole house to them, pays the mortgage and takes on all the risk.

ThreeGreens

https://www.boards.ie/discussion/comment/121223283#Comment_121223283

Totally agree. There really was nothing that could be done financially to encourage a landlord to say if they were thinking of getting out. The sums involved would need to be significant and the government simply can't afford to do that either financially or politically.

I don't think it's tax that is forcing landlords out (despite what you hear on the radio). What is forcing them out is fear of a bad tenant (that they regularly hear about in the media). If the government brought in some sort of regularity system that would see a bad tenant (non paying or anti social behaviour) evicted in a relatively short period with little hassle, then this would change many minds (both landlords thinking of leaving and tenants who feel immune). What would be required is major reform of the RTB to make it actually function and legislation to have a process that would see a tenant get a fair hearing before any eviction but evicted within 3 months of of the rent due date if they were found to be in default.

Cost to the government would be nothing and it would definitely make a different to a number of landlords that I work with.

spaceHopper

@ThreeGreens

Cost to the government would be nothing and it would definitely make a different to a number of landlords that I work with.

That's not true, if you were able to deal with bad tenants quickly then they would become homeless and they would become the government's problem to house.

Take a tenant who games the system and doesn't want to pay. They should be easy to point out and deal with.

What about the guy who lost his job has no savings and will eventually get social welfare? In the meantime their LL is a free overdraft - their mortgage doesn't matter. They don't want you kicking them out because it causes more problems for the state.

Or the couple who are always late with their rent and every time their car needs a service they pay their rent is stages.. I've had these. If you evict them they become a problem for the state.

Claw Hammer

If landlords were able to invest the profits tax free into a pension on the same basis that other income, there would be an incentive for people to enter and stay in the market. Rents are taxed as passsive income, but residential letting is not passive in the same way as commercial FRI letting.