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Rental income tax query

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    #62
    riclad
    Registered Users Posts: 8,184 ✭✭✭riclad


    If a landlord pays off the mortgage , he makes more profit,
    he has no loan interest to claim as an expense against tax.
    he will pay more tax than someone who rents a house but is still paying off the mortage .
    Unless he has loss,s from another property to use an an expense .
    I,m not a tax expert but it may be wiser to invest in a reit fund
    than to buy a house using an investment mortage .
    And you do not have the stress of dealing with tenants .

    qoute ;

    Legislation introduced in 2013 allowed for the establishment of Reits, which are generally exempt from corporation tax and levies on gains from property values or capital gains tax (CGT). The idea is to shift tax liabilities on to shareholders who must, by law, receive at least 85 per cent of a Reit’s rental profits


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    #63
    Obvious Desperate Breakfasts
    Closed Accounts Posts: 8,474 ✭✭✭Obvious Desperate Breakfasts


    riclad wrote: »
    If a landlord pays off the mortgage , he makes more profit,
    he has no loan interest to claim as an expense against tax.
    he will pay more tax than someone who rents a house but is still paying off the mortage .
    Unless he has loss,s from another property to use an an expense .
    I,m not a tax expert but it may be wiser to invest in a reit fund
    than to buy a house using an investment mortage .
    And you do not have the stress of dealing with tenants .

    qoute ;

    Legislation introduced in 2013 allowed for the establishment of Reits, which are generally exempt from corporation tax and levies on gains from property values or capital gains tax (CGT). The idea is to shift tax liabilities on to shareholders who must, by law, receive at least 85 per cent of a Reit’s rental profits

    Oh sure, but it’s not a huge amount more tax, whereas if capital repayments could be subtracted from the rental income, it would be quite a big difference in tax bills between mortgage holders and those who own the property outright.


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    #64
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Obvious Desperate Breakfasts wrote: »
    Oh sure, but it’s not a huge amount more tax, whereas if capital repayments could be subtracted from the rental income, it would be quite a big difference in tax bills between mortgage holders and those who own the property outright.

    But why is the taxpayer allowing debt be a tax deductible cost? It encourages people to load up on debt- and discourages clean/clear ownership of units. Its a lot more financially precarious for landlords in the long run, and indeed, similarly for the tenants.

    In my eyes- there should be some sort of an incentive to pay down debt- its incredible that there is a perverse incentive not to do so.


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    #65
    Geuze
    Registered Users Posts: 13,104 ✭✭✭✭Geuze


    Madden Delightful Treason wrote: »
    Honestly how people can see a loss making rental as being profitable is beyond me.

    No other business could operate under such conditions.

    Profitable would mean that the LL has additional income in his bank account every month after mortgage and taxes are paid.

    Every month as the debt is repaid, the equity in the house is building up.

    So the landlord is slowly acquiring an asset.

    That is the profit/gain.


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    #66
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    Geuze wrote: »
    Every month as the debt is repaid, the equity in the house is building up.

    So the landlord is slowly acquiring an asset.

    That is the profit/gain.

    However, the most tax efficient way of managing the asset- is to never pay down any principal on the loan- keep the debt associated with the property as high as possible, to have a costbase to offset against cashflow.

    Its perverse.


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    #67
    awec
    Administrators Posts: 53,429 Admin ✭✭✭✭✭awec


    Madden Delightful Treason wrote: »
    Honestly how people can see a loss making rental as being profitable is beyond me.

    No other business could operate under such conditions.

    Profitable would mean that the LL has additional income in his bank account every month after mortgage and taxes are paid.

    Er, no.


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