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Tax advice for first time landlord

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Comments

  • #52
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Macmillan150 wrote: »

    I don’t see the bank letting us keep apartment as well as having a second mortgage so it really would only be short term.


    You will probably need the banks permission anyway to rent the property, and if their calculation is that you can't have a second mortgage, they will hardly give you permission. And they may charge you more for the mortgage because of the higher risk.



    If it is genuinely short term, then you would be much better to look at AirBnB as you take no risks with losing posession as might be the case with an overholding tenant.
    Also if you plan on selling soon, restrict any money spent on the place to cosmetic touches. You would be unlikely to recoup any major expenditure on selling the house.


  • #53
    davindub
    Registered Users, Registered Users 2 Posts: 1,447 ✭✭✭davindub


    Macmillan150 wrote: »
    Ok. I did not know you had to pay tax a year ahead!!
    You say not to waste money in an agent but if it’s tax deductible what is the drawback there?
    The 8 years at 12.5 percent a year tax relief on capital expenditures? This is only if the property is ALREADY being rented? How long does it need to be rented before you could buy a new sofa or flooring and still be eligible for tax relief.

    I don’t see the bank letting us keep apartment as well as having a second mortgage so it really would only be short term.

    Your first tax return will be due october 19.

    Pay 2018 tax balance.
    Pay 90% of 2019 liability (or equal to 100% of 2018 balance).

    As this happens in Oct 19 you are not paying tax a year ahead.if you are smart keep tax due as you collect rent, preferably put into best interest account you can get.


  • #54
    PierreLeCake
    Registered Users Posts: 29 ✭PierreLeCake


    davindub wrote: »
    Your first tax return will be due october 19.

    Pay 2018 tax balance.
    Pay 90% of 2019 liability (or equal to 100% of 2018 balance).

    As this happens in Oct 19 you are not paying tax a year ahead.if you are smart keep tax due as you collect rent, preferably put into best interest account you can get.

    Davindub is correct here. I chose my word poorly but for your first Tax return you will be writing a big cheque


  • #55
    PierreLeCake
    Registered Users Posts: 29 ✭PierreLeCake


    Macmillan150 wrote: »
    You say not to waste money in an agent but if it’s tax deductible what is the drawback there?
    The 8 years at 12.5 percent a year tax relief on capital expenditures? This is only if the property is ALREADY being rented? How long does it need to be rented before you could buy a new sofa or flooring and still be eligible for tax relief.

    I don’t see the bank letting us keep apartment as well as having a second mortgage so it really would only be short term.

    You have to remember anything that is Tax deductible is still an expense for you. Here is a simple example.The figures won't match your reality but you will get the idea
    Rent for the year = 12000
    Tax Deductible Expenses = 6000
    "Profit" = 6000 (12000-6000)
    Tax @ 52% 0n 6000 = 3120
    Between Tax and Expenses it has cost you 6000+3120 = 9120
    Now add an Agenst fee. Let's say 1500 so your Tax Deductible Expenses are now 7500
    Rent for year = 12000
    Tax Deductible Expenses = 7500
    Profit = 4500 (12000 - 7500)
    Tax @ 52% 0n 4500 = 2340
    Between Tax and Expenses it costs you 7500 + 2340 = 9840
    So although the Agent is Tax Deductible you are 720 worse off in the long run. (9840 - 9120 = 720)
    I'm not up todate on what Agenst charge but I seem to remember it was one months rent just to advertise your property, deal with enquiries , show the property and select the best tenant. They will then charge extra to Manage the property so if the tenanat has a problem they will ring the Agent who will have to ring you anyway.If you have a good Tenant and the property is in good condition you would probably only get about 4 phone calls a year anyway.I just think an Agent is an unneccessary expense and if they are not responsive to a tenant then it causes you hassle in the end.
    Capital Expenses you can claim from Day 1 of the rental but they apportioned per month.
    EG. Capital Expense = 6000.
    You can claim 750 per year for 8 years.
    However if you only start renting your property from the 1st of September then you will only have rented it for 4 months so in your first year you can only claim 4 months of Capital Expenses
    I.E 750 / 12 = 62.5
    62.5 * 4 = 250
    You can't claim pre letting expenses for a first time rental so if you pay a guy to paint your apartment and hire cleaners to tidy it up prior to renting for the first time then its money down the drain I am afraid. If it was a long term rental these things would be worth doing but not in your case.
    If you buy a new sofa that would come under Capital Expenditure so you could only claim 12.5% of its value over 8 years.
    As advised before you need an Accountant to sit down and do the maths taking your particular circumstances.
    Don't fall into the trap of thinking that if something is Tax Deductible you are somehow better off. You are not.


  • #56
    DrPhilG
    Registered Users, Registered Users 2 Posts: 12,452 ✭✭✭✭DrPhilG


    I'm using an agent for a property. I'm not under any illusion that it's free because it's tax deductible but it makes it cheap enough to be worthwhile and save me the bother.

    If they had just found me a tenant it would have cost 1 month's rent, €520. Yes I'm well away from Dublin, lol.

    Because they are managing it, they only charge 1 weeks rent initially, then 10% per month. So the total for the year is €744.

    Regardless of the tax write off, its only costing me about €20 a month more to have it managed than if I just used the agent to find and vet the tenant.

    After the first year if the tenant is fine and staying, I could ditch the agent at that point and go it alone. But depending on the circumstances I may well let them continue.


  • #57
    ouxbbkqtswdfaw
    Closed Accounts Posts: 1,253 ✭✭✭ouxbbkqtswdfaw


    Agent or no agent, all the responsibilities and problems come back to you.


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