Renting Principal Primary Residence

TommieG90 · 28-09-2023 5:52pm #1

I'm in the process of changing jobs and moving home to the west. I have a house in Meath, contemplating selling/renting, at the moment I'm fixed on 2.3% for 5 years, 14 years left on mortgage. If I rent out the house which I would do legitimately and officially, do I need to change my mortgage with the bank, i.e. will I lose my good rate? Has anyone done something similar? I often hear that mortgage interest is tax deductible but how exactly does that work Thanks

Geuze · 28-09-2023 9:21pm

As long as the repayments continue, most people in this situation don't tell the bank.

Geuze · 28-09-2023 9:22pm

https://www.revenue.ie/en/property/rental-income/irish-rental-income/what-expenses-are-allowed.aspx

What expenses are allowed?

You can claim certain expenses against your rental income to reduce the amount of tax you will have to pay.

General expenses

Allowable expenses include:

rates you pay to a local authority for the property
rents you pay for property such as ground rents
insurance premiums against fire and public liability
maintenance of your property such as cleaning, painting and decorating
property fees before you first rent out your property such as management, advertising, legal or accountancy fees
cost of any service or goods you provide that are not repaid by your tenant (such as electricity, central heating, telephone, service charges, water and refuse collection).
certain mortgage protection policy premiums
expenses in between renting out the property in certain circumstances
capital allowances
repairs, such as rot treatment, mending windows, doors or machines
certain pre-letting expenses on vacant residential property
the cost of registering with the Residential Tenancies Board (RTB).

You must keep full and accurate records of all expenses for each property you rent out.

You may partly let a premises. You can only claim the portion of the expenses related to the part of the property that is let. For example if half the rooms are let, then half of the expenses can be claimed.

The receipt of rent is treated as the carrying on of a trade. Expenses are only allowed to the extent that they would be allowed for that trade.

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:

Percentageinterest accrued on or after 7 April 2009 to 31 December 201675%interest accrued from 1 January 2017 to 31 December 201780%interest accrued from 1 January 2018 to 31 December 201885%interest accrued from 1 January 2019100%

For the purposes of the restriction, interest is treated as accruing on a daily basis. The date the loan is taken out is not relevant.

In certain situations, you may be able to claim 100% mortgage interest relief in the years when the relief was restricted. To qualify you must have:

rented out your property for three years to tenants receiving certain social housing supports.
registered with the Residential Tenancies Board (RTB).

See the manual Part 04-08-06 for more information on the deduction of Mortgage Interest.

See the manual Part 04-08-10 for more information on registering tenancies with the RTB.

Capital allowances

You can claim capital allowances on the cost of furniture and fittings in your property. This is known as ‘wear and tear allowances’ or ‘depreciation’.

The current rate for these allowances is 12.5% of the cost per year, for a maximum of eight years. The allowances may include:

furniture you purchased for your rental property
the cost of the purchase of white goods such as a fridge or a dishwasher.
Example 1
You purchased a suite of furniture for €1,000. The wear and tear allowance of 12.5% for this is €125 per year.
You can claim this against the rental income for the next eight years.
Example 2

Next: What expenses are not allowed?

Calahonda52 · 28-09-2023 9:32pm

https://www.boards.ie/discussion/2058315934/renting-principal-primary-residence

It will no longer be your PPR so CGT will arise if you sell after several tears of renting

if you dont change your contact address then should be no issue with bank

Moonbeam · 28-09-2023 11:28pm

No you do not need to tell the bank

You do need to register with the PRTB and pay tax on the rental income.

dennyk · 29-09-2023 11:33am

You most likely do need to advise the bank per the terms of your loan agreement. If you don't, maybe you'd get away with it, but if the bank does find out, they could cancel your loan (meaning you'd have to pay the entire balance immediately or face repossession). When you inform them, they will likely raise your interest rate to a buy-to-let rate, which will be somewhat higher than an owner-occupier rate, though if you currently have a low loan-to-value ratio then the rate could be a bit lower than it would otherwise be.

Keep in mind you will have to pay Irish tax on your rental income, even if you are moving abroad. If you are no longer going to be resident in Ireland, you'll probably only be paying 20% tax, but if you are staying in Ireland and will have a job or other income here, your rental income will be taxed at your marginal rate. As others have noted, renting out the property will also leave you liable for some CGT when you eventually sell the place, based on the proportion of time it was not your PPR.