Mortgage Interest expenses

G

gaffer

Guest
If I have two properties and one is let and the other is a PPR - can the mortgage interest from both properties be deducted against rental income ? or is it only the mortgage interest from the rental property that can be written off as an expense. Many thanks.
 
gaffer said:
If I have two properties and one is let and the other is a PPR - can the mortgage interest from both properties be deducted against rental income ? or is it only the mortgage interest from the rental property that can be written off as an expense. Many thanks.
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Only interest on the loan(s) used to purchase/renovate a rental property can be offset against rental income. In some cases the loan(s) may be secured on properties other than the rental property. Note also that you cannot write interest off against rental income that you are also claiming owner occupier mortgage interest relief on (e.g. where the mortgage on a PPR is split between money used to purchase the PPR and money used to purchase/renovate a rental property). Based on your query I would recommend that you seek independent, professional advice on the tax issues relating to your property investment.
 
I would have thought it was self evident that only the mortgage interest from the investment property could be offset against the rental income from the investment property.

I know there are loopholes for everything these days but surely not this? I don't know the the definitive answer so sorry for maybe sounding a bit self rightous but it's obvious to me that this shouldn't be allowed.
 
It my first question to post here ... Thanks for the prompt replies

I also though it was self evident that only mortgage interest from the invest prop could be offset against its rental income. I was told otherwise therefore the query.

To explain further my current PPR will become invest property after I build a new home. The mortgage on the current PPR is only 130k with rental income upto 15k pa. Mortgage on new property should be around 350k. As the mortgage int on future rental house will be a good deal less than the rent I will get caught for tax ? Just makes me wonder if I should sell current PPR and pocket the difference approx 250k avoid CGT and leave me with a small mortgage ?
 
Ahh. There's actually a rake of similar questions to this being asked recently, though the exact wording is quite varied so it wouldn't surprise me if the Search facility wasn't much use to you. The answers are quite varied too and usually degenerate into anti/pro investment discussions.

I'd sell the place / avoid CGT and sleep easy with a small mortgage, but that's a personal choice rather than based on the best route financially. I'm sure the potential real estate moguls would have a completely different view.
 
could you not build your new PPR and then when renting current PPR then remortage the property, use the capital to make payment on your PPR and then bobs your uncle, you have higher mortgage on rental property. I know there would be costs associated with this, you would need to look at the tax saving on having lower taxible income over potential investment period to decide financially if worth while.

Personally i'd sell it and have lower mortgage to start with.
 
deem said:
could you not build your new PPR and then when renting current PPR then remortage the property, use the capital to make payment on your PPR and then bobs your uncle, you have higher mortgage on rental property. I know there would be costs associated with this, you would need to look at the tax saving on having lower taxible income over potential investment period to decide financially if worth while.

Personally i'd sell it and have lower mortgage to start with.
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Remortgaging won't work as the purpose of the borrowings is important and only borrowings used to purchase or renovate the rental property are allowable.
 
If you do decide to sell and you are not contributing to a pension, or contributing less than the max allowed by revenue why not fund the pension from some of the proceeds over a number of years subject to revenue rules. You could get tax relief of up to 48% i.e. get almost half the money back from revenue. Don't forget that you can claim against last years salary up to 31/10. Drawback is you can't get at the money until you retire.
 
Had initially hoped to re mortgage current PPR and release equity to fund large part of build of new PPR and leave small mortgage on new house. This dosen't look like a runner. And if it was its no use as a mortgage interest expense as its not used for purchase or renovation of rental property.

Have funds approved to cover both houses but not sure what to do.

As I see it my options are as follow
1 Sell and take money - and leave small mortgage
2 Hope rental income is steady and keep both properties for a few years. When I sell rental property pay CGT tax piece
3 Rent it for a year, hope price increases and sell within the year and have no CGT to pay as it still qualifies as PPR for a year?

Any other option ???
Thanks to all for you replies so far
 
gaffer said:
... and have no CGT to pay as it still qualifies as PPR for a year?
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Yes. Bear in mind that if you rent it out within 5 years of purchase as an owner occupier then a clawback of stamp duty applies.
 
AM OK on that front ...... purchased over 6 years ago
Cheers
 
Thanks for all to date ... prettty clear on what mortgage interest I can write off.

Another related point, while building my new PPR I intend to rent a house myself and let my old PPR. As I've no PPR as such during this stage, I was wondering if I have an addition 12 months on top of the 12/18 months that I am renting to sell old PPR without having to pay CGT ? or do I need to do this within the first 12 months?

thanks again
 
You have up to 12 months to sell your PPR before CGT kicks in. Even if you let the property for say 4 years and then sell the first 12 months is not included when calculating CGT.
 
Got that ...... so in theory you can have 2 PPR for 12 months.

How does this work
I let my own house in Dublin
Move west and let a house close to build for 12/18 months
So for this period I have no PPR as such
After house is built and becomes my PPR do I have another 12 months to sell rental house without CGT
 
so in theory you can have 2 PPR for 12 months.
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Yes, for the purposes of CGT calc the first 12 months after moving are disregarded. If you rent another property this then becomes your PPR.

After house is built and becomes my PPR do I have another 12 months to sell rental house without CGT
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No: the 12 months starts from the date you move out /let the property
 
asdfg said:
Yes, for the purposes of CGT calc...
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But not, for example, for the purposes of owner occupier mortgage interest relief, rent a room relief etc.
 
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