How much is taken in tax

Between 20% and 40% depending on your tax band.

letsgo2018 wrote: »

If someone wanted to rent out their house how much would they lose on tax

By and large, you will pay tax on your profits only, just like any other business.

Don't mix up profits with cash flow. You might have low or negative cash flow if you are repaying principal on a mortgage, but you will still be taxed on your profits.

AndrewJRenko wrote: »

By and large, you will pay tax on your profits only, just like any other business.

Don't mix up profits with cash flow. You might have low or negative cash flow if you are repaying principal on a mortgage, but you will still be taxed on your profits.

Well in fact you will pay tax on the income not on the profit. You will be allowed to deduct certain expenses, such as the interest portion of the mortgage, and will be allowed capital allowances but will not for example be able to just deduct the cost of replacing a fridge/cooker/boiler if the existing one breaks. So it is the income that is taxed not teh profit.

and it is taxed at your marginal rate - so 53% for most landlords.

Fian wrote: »

Well in fact you will pay tax on the income not on the profit. You will be allowed to deduct certain expenses, such as the interest portion of the mortgage, and will be allowed capital allowances but will not for example be able to just deduct the cost of replacing a fridge/cooker/boiler if the existing one breaks. So it is the income that is taxed not teh profit.

and it is taxed at your marginal rate - so 53% for most landlords.

Replacing a fridge is a deductible capital allowance.
You pay prsi and income tax after capital and current expenses. You pay usb before capital allowances

letsgo2018 wrote:

If someone wanted to rent out their house how much would they lose on tax

The best solution is to avail of the rent a room scheme rather than renting out the entire house. You can earn up to 14k tax free with the rent a room scheme. You'd need to pull in 20 to 25k a year renting the whole house to end up with 14k after tax. In Dublin you'll easily get 14k for two rooms in your home.

An Cigire wrote: »

If someone is non resident for tax working abroad and rent out a house is it at lower tax band of 20% as your not paying rent in Ireland?

Also can it mentions above about mortgage interest being used as a deduction is that correct?

Cheers

It could be 20%, it could be less, it could be more. The 20% refers to tax tennants are supposed to deduct from the rental agreement payments and remit to Revenue if they are paying direct to a non resident landlord not an agent acting on behalf of the landlord. Mortgage interest is an allowable expense. If TRS is claimed, it needs to be ceased.

[/quote]

It could be 20%, it could be less, it could be more. The 20% refers to tax tennants are supposed to deduct from the rental agreement payments and remit to Revenue if they are paying direct to a non resident landlord not an agent acting on behalf of the landlord. Mortgage interest is an allowable expense. If TRS is claimed, it needs to be ceased.[/quote]

TRS does not apply to me, so potentaillly I could claim this mortgage interest at end of year once I’m PTRB registered.

If your tenant is paying let’s say the 20% tax as your a non resident landlord and you have mortgage interest and other deductibles do you get this back from revenue at year end from the tax the tenant has paid?

Thanks for that. A lot I didn’t know cheers

sean8n wrote: »

Regarding Rent a Room Scheme, from the CI website:

"Currently, the total (gross) rent that you get, which includes sums that the tenant pays for food, utilities, laundry or similar goods and services, cannot exceed €14,000"

So the landlord must provide accommodation, utilities, laundry and even food in return for rent? Surely I have that wrong.

That's pretty tight, two tenants paying 450-500 each + electric would easily bring that to 14k, never mind laundry and food.

Frankly, I can't understand where food and laundry come into this, full board?

You've misunderstood it. It's just allowing for situations where food, laundry and benefits like that are included in the rent, most likely students in digs.

For example, if the rent is E600/month including meals worth E100, the landlord can't deduct the worth of the meals. Otherwise, They might try stuff like that to keep themselves below the tax exempt figure of E14000.

sean8n wrote:

So the landlord must provide accommodation, utilities, laundry and even food in return for rent? Surely I have that wrong.

Landlord does not have to provide laundry or food but if they do the total charges can't exceed 14k.

Don't forget 14k tax free is equivalent to renting out an entire house & paying tax on it. It really is a super deal and I'm supprised more struggling homeowners don't avail of it

sean8n wrote: »

Thanks guys. I'm in my 50s and apparently unemployable, but have no wish to go on welfare. I don't have a mortgage, nor an expensive lifestyle so I could live on 14k I could get from two rooms. I couldn't afford to include the electricity in the rent though, especially as it's just risen 7%, so that was my main worry.

Electricity is a utility, so if you charge rent and then charge for electricity on top of that, and the total of the two charges exceeds 14k, then you are outside the rent-a-room scheme.

Peregrinus wrote: »

sean8n wrote: »

Thanks guys. I'm in my 50s and apparently unemployable, but have no wish to go on welfare. I don't have a mortgage, nor an expensive lifestyle so I could live on 14k I could get from two rooms. I couldn't afford to include the electricity in the rent though, especially as it's just risen 7%, so that was my main worry.

Electricity is a utility, so if you charge rent and then charge for electricity on top of that, and the total of the two charges exceeds 14k, then you are outside the rent-a-room scheme.

Collecting money to pay a electricity bill split between people is not income to the payer though & its not part of the 14k.

It basically goes like this

(Gross) Rental Income
- Mortgage Interest (85% I think moving to 100%)
- Non capital repairs (more day to day stuff like paint, bulbs, boiler servicing, etc)
- Mortgage protection premium
- Any other allowable expenses as per Revenue guidance
= Net Rental Income

Then deduct this year's portion of capital expenses - if any (expensive items you're writing off over several years to smooth out your tax liability)

= Taxable Rental Income

Multiply the above by your tax rate (20 or 40%), PRSI and USC = your tax liability

Then don't forget that once you have non PAYE income of over 5k I think it is, then you have to register for ROS as you will be self assessed so you have to do a Form 11 online each year. This then comes with the joy of preliminary tax which is a whole other pain in backside in the initial years anyway when you're trying to balance it out and find the cash (in your first year anyway) of essentially paying two years tax in one go. Some accountants have advised friends of mine not to bother with the prelim tax - seems like terrible advice to me and a recipe for an audit. Maybe Revenue are less concerned with smaller amounts of prelim tax but I wouldn't take the risk.

You'll often hear people giving out really dangerous advice to cut corners, to do this, don't do that. Usually this is them justifying their own corner cutting and should be taken with a dump truck of salt.

A good accountant can do your return for you for a few hundred and if you're unsure, I highly recommend getting one for the first few years to make sure you are on the right path. Could save you money and could save you a lot in interest and charges later on, if you mess it up. The accountants fees should be a deductible expense.

If you are getting TRS, cancel it as soon as your rent the place out as you're no longer entitled to it.

ted1 wrote: »

davindub wrote: »

Collecting money to pay a electricity bill split between people is not income to the payer though & its not part of the 14k.

Get the tenant to pay the utility directly. Say 40 Euro a month direct debit into the electricity account

There's no need to do this, flat charges would be income, if you have a bill of 200 euros and it is split 2 ways, that is not income