rent a room tax?

LegacyUser

ok, i've been reading this on oasis, http://www.oasis.gov.ie/housing/buying_a_house_or_flat/rent_a_room_scheme.html#id3137255

says "The total (gross) rent you receive (which includes sums the tenant pays for food, laundry or similar goods and services) cannot exceed 7,620 euro "

now say your rental income is €8500, are you taxed on the balance, ie, €880, or are you taxed on the lot?

Spocker

From the Rates section on the same page

Rates

Rental income achieved from renting a room(s) in your home is exempt from tax up to a maximum limit of 7,620 euro (5,587 for tax year 2001).

.. so I would guess you're right; the implication is that anything over that is subject to tx. However, I ain't a soliciter but I would suggest you give your local tax office a ring - that's what they are there for and they are really helpful on the phone (and you'll have a definitive answer)

HTH, S.

Victor

I had understood it to be that up to €7,620 was tax exempt, but if you went over that level you were taxed on everything. I suggest you make further enquiries on www.revenue.ie

NB: http://www.oasis.gov.ie/housing/buying_a_house_or_flat/rent_a_room_scheme.html#id3137255

...

The total (gross) rent you receive (which includes sums the tenant pays for food, laundry or similar goods and services) cannot exceed 7,620 euro (or 5,587 euro for tax year 2001). If you receive rental income over and above this amount, you are then liable for tax at the standard rate.

...

While the income you receive from renting a room or rooms in your principal private residence is not liable to either PRSI or the 2% health levy, it must be included on your annual income tax return.

There is no deduction for expenses made in working out the rental income received. If the income you receive does not exceed the limit in the year (currently 7,620 euro), then these profits/losses are treated as "nil" for the year of assessment.

...

Bluehair

Victor wrote:

I had understood it to be that up to €7,620 was tax exempt, but if you went over that level you were taxed on everything

I'm 99% certain that this is indeed the case. Once you go over the limit the whole lot becomes taxable.

MorningStar

I heard that too. It also apparently has to be part of the house you live in. So if you had a seperate flat set up and rented it out you aren't exempt. The weird think is I heard it from an accountant who said he couldn't find any actual specific documentation to state that but the revenue told him. How difficult is it to pay all the right taxes if there isn't actual documentation.

SparkyLarks

Your taxed on the whole lot if you exceed.

the scheme was set up to allow people get some help on a mortgage, not to make loads of money. and hence help owner occupiers to get houses and not investors. It's intended to help people with 2 or 3 beds.

7,620 is a great help for a mortgage (625 a month).

LegacyUser

just got mail back from revenue, and yes, you are taxed on whole lot if you exceed $7620.

i think thats ridiculus, if you earn say €8500, wheres the incentive to pay the tax.

MorningStar

paperclip wrote:

just got mail back from revenue, and yes, you are taxed on whole lot if you exceed $7620.

i think thats ridiculus, if you earn say €8500, wheres the incentive to pay the tax.

THe idea is not to earn over €7620. Actually the idea is you are only renting out one room so €635 a month seems like a decent rent for one room in a shared. Are you renting more than one room? €708 a month is pretty good for one room if you are. THe incentive to pay any tax is what? There isn't any really other than you have to and some feel the moral obligation. Anyway it's not like the tax office really know what is going on in your house unless you let them know via e-mail or something

LegacyUser

renting one room and am under the cap, but have another room and if i rented this i'd be just over it, prob by €800 or so.

my point is, i'd have no problem paying tax on the balance, but its ridiculus to expect people to declare this income if its just a little over, if i was renting a couple of properties it would be a different story, and i'd keep things above board.

the incentive is to have a system thats fair and makes sence, this one certantly doesnt and i'd say most people in my boat wouldn't declare it, they'd get more revenue if they just tax you on the balance.

by the way, is there anyway they can catch you?

guess i shouldn't have given my address and rsi number in the email, huh?

MorningStar wrote:

THe incentive to pay any tax is what?

MorningStar

paperclip wrote:

renting one room and am under the cap, but have another room and if i rented this i'd be just over it, prob by €800 or so. etc...

Then the tax idea is doing exactly as they want it to. They didn't want people buying houses and renting most of it out and paying little tax. This would have pushed up the house prices. They do actually get it right every now and then. I know seems a little unfair but it does allow you to rent out a room to a student (not a full calander year) and get some money tax free which is pretty amazing really. It was really well thought out idea to get property use up and possible assitance to the strugling house buyer. Things have just gotten a bit out of control now. You could always give the €800 back to your tenants as loyalty discount solving the problem. Make you look nice and save you a fair bit of money.

The tax office probably won't find out but if you fell out with a tenant they might shop you. THe number one suggestion here if a landlord does something wrong in here. :rolleyes:

You are joking about the rsi number and stuff right?

SparkyLarks

the idea of the cap is so that you can;t charge huge rents, not saying you are.

It's probably better for you to charge less for the two rooms( you'd have to pay 1700 in tax at least, more if some's taxed at the higher rate)

If you charge 317.50 per room instead of 350, you loose 800, but seaing as you'd be charged a lot more in tax it incentvises you to keep your rent low. Thus helping the guys who rent off you.

Renting out the second room and reducing the rend bring in an extra 285 a month for you.

I must say personally I think this is a very balanced piece of tax incencitives. It benifits the owner occupier and the renter to a balenced amount and gives nothing to the investor.

LegacyUser

yes, i am joking.

MorningStar wrote:

You are joking about the rsi number and stuff right?

LegacyUser

ye, i'd say giving the tenant/s a nice christams presant would be the way to go.

Victor

The idea behind the scheme was to encourage people with spare capacity to use it and on the face of it appears successful.

paperclip wrote:

just got mail back from revenue, and yes, you are taxed on whole lot if you exceed $7620. i think thats ridiculus, if you earn say €8500, wheres the incentive to pay the tax.

But you are (a) getting mortgage interest relief (b) rental income tax free (c) no capital gains tax (d) refuse / water charges tax credit.

Just how much will you actually be paying for the mortgage?