Rental income questions

[Eddie Peters]

I would appreciate confirmation on some/any of the following.

1. Pre-rental expenses are not allowable, but white goods can be estimated based on current market value.

2. Taxable rental income is the gross rental income minus expenses plus capital allowances at 12.5% over 8 years.

3. USC is charged on rental income after capital allowances and before expense deductions.

4. Assuming taxed on higher tax rate, then for Jan to Dec 2014, the taxable rental income will incur 52% tax (41% income tax + 4% PRSI + 7% USC) in 2015.

5. Rental deposit payments are not included in tax returns.

6. 75% of mortgage interest is deducted from the gross rental income if registered with the PRTB - costing €90 if registered within the month of tenancy; or €180 retrospectively after one month. How is a retrospective application made e.g. if tenants have moved on, are PPS numbers and signatures still required.

7. Mortgage protection policy payments are allowable for rental tax income purposes.

8. An overall rental loss will incur 4% PRSI + USC charge (if mortgage interest, expenses and capital allowances exceed rental income),

9. Rental allowance is paid to occupier regardless if not used to pay for rental property occupied.

10. Preliminary tax is required if rental profit exceeds €3174 and is based on the income paid for the previous year.

11. A loss on one Irish rental property can be off-set against another Irish rental property.

12. An audit by Revenue will require expense receipts for the previous four years.

13. After six months of occupancy, a tenant is allowed to stay 112 days in the premises after notice given by owner.

14. Tenants may occupy a property without paying rent until a decision has been made by the PRTB.

15. Property tax is not an allowable rental expense.

16. Water tax (when paid by landlord) is an allowable expense.

17. When a tenant vacates a property, expenses can be claimed while a replacement tenant is being sought.

18. When making a tax return, savings are liable for dirt tax + USC.

19. If lump sums have been paid against the mortgage, then mortgage protection policy payments can be reduced.

20. There is absolutely no government incentive to let a property or to save for the future.

Thanks in advance.

 

[T McGibney]

Is this an exam?

 

[Eddie Peters]

Sorry. I know it sounds like an exam It's only a few general questions that property investors may be able to confirm.

 

[Fella]

So what your saying is property investment is not worth it , I'd love to do a comparison between direct property investment and investing in a REIT , have you considered REIT's as an alternative , when I am not so busy and move away from my current job/hobby I will certainly do such studies.

 

[Eddie Peters]

Thanks for the feedback Fella. I'm not really interested in the merits of alternative investment strategies. Simply posting some basic questions that property investors may be able to throw some light on

 

[Gerard123]

Simply posting some basic questions

Agree. Suggest an accountant or tax advisor needed.

 

[Eddie Peters]

Thanks Gerard123, Fellla and T mcgibney for your suggestions. I can't see why I would employ an accountant or tax advisor to answer fairly basic questions.

 

[Gordon Gekko]

Thanks Gerard123, Fellla and T mcgibney for your suggestions. I can't see why I would employ an accountant or tax advisor to answer fairly basic questions.

If they're that basic, why don't you know the answers? I'm all for helping people, but you're taking the proverbial with that list. Pay a professional and get on with it.

 

[Branz]

At least 3 of them are wrong

To help you with it:

1. One of them is a prime number.
2. one of them is before no 12.
3. If I add the first and second wrong ones I get the number of the third wrong one.
4. if I subtract the first one from the last one I get the number of the second wrong one.
5. six times the first one equals
6. the second wrong one multiplied by (the third wrong one minus the first wrong one) = 144

.

 

[DB74]

At least 3 of them are wrong

To help you with it:

1. One of them is a prime number.
2. one of them is before no 12.
3. If I add the first and second wrong ones I get the number of the third wrong one.
4. if I subtract the first one from the last one I get the number of the second wrong one.
5. six times the first one equals
6. the second wrong one multiplied by (the third wrong one minus the first wrong one) = 144

.

Ha Ha

 

[Eddie Peters]

Apologies for trying to stimulate discussion on the property investment forum of Askaboutmoney.
Thanks for the insightful comments.

 

[stephnyc]

@Eddie Peters - I cant help you, but you sound like you have thought this through, and if we could get clarification, it could end up as a truly helpful Key Post for all those considering renting out a property (whether by choice or not).

Hopefully some experienced posters will come along soon

 

[Bronte]

1. Pre-rental expenses are not allowable, but white goods can be estimated based on current market value.

Correct on both counts. The white goods and other furniture are to be depreciated over 8 years.

2. Taxable rental income is the gross rental income minus expenses plus capital allowances at 12.5% over 8 years.

Can't remember offhand.

3. USC is charged on rental income after capital allowances and before expense deductions.

There can be USC in some circumstances, but also can't remember exactly how it's charged. It's just another tax to deter us investors, the ones they could really really do with, but we're the baddy landlords. Evil monsters who actually house people, in good accommodation in my case, if you don't mind my saying so.

4. Assuming taxed on higher tax rate, then for Jan to Dec 2014, the taxable rental income will incur 52% tax (41% income tax + 4% PRSI + 7% USC) in 2015.

You'll hit the higher income tax rate if you've other income. Adding up to around 50% when you add in the PRSI nd USC.

5. Rental deposit payments are not included in tax returns.

Of course, it's not an income, you have to pay it back !

6. 75% of mortgage interest is deducted from the gross rental income if registered with the PRTB - costing €90 if registered within the month of tenancy; or €180 retrospectively after one month. How is a retrospective application made e.g. if tenants have moved on, are PPS numbers and signatures still required.

Yes to 75%, yes you must be restered, those fees sound correct. Retrospective can be done, no idea how people manage this without PRSI nos. Signatures are not needed, it can be done online. I also know for some cases no PRSI is needed (asylum seekers of people new in the country)

7. Mortgage protection policy payments are allowable for rental tax income purposes.

Yes, as long at the policy known as term insurance - the cheap ones - or one that does not include any other benefit (like savings plan)

8. An overall rental loss will incur 4% PRSI + USC charge (if mortgage interest, expenses and capital allowances exceed rental income),

Not sure what this means.

9. Rental allowance is paid to occupier regardless if not used to pay for rental property occupied.

No idea what you're talking about? Is it the tax deduction tenants used to get, they did away with that.

10. Preliminary tax is required if rental profit exceeds €3174 and is based on the income paid for the previous year.

Can't remember but sounds right.

11. A loss on one Irish rental property can be off-set against another Irish rental property.

Yes. Uneconomic lettings are not allowed however.

12. An audit by Revenue will require expense receipts for the previous four years.

I thought you'd to keep records for 6 years. I've mind since the year dot. This is the best bit of advice you will ever get.

13. After six months of occupancy, a tenant is allowed to stay 112 days in the premises after notice given by owner.

Not a clue. Don't care whether my tenants come or go. They mostly stay. Currently it's a great market, haven't had a moving tenant since I can remember. I've no leases, don't care about notices from tenants or anything as long as they don't do any damage (we're not talkign about the never ending shares I should have in Magnolia, or all the plumbers I know in Ballygobackwards) . Leases on paper are worthless. One tenant once asked me for a lease.

14. Tenants may occupy a property without paying rent until a decision has been made by the PRTB.

God help you if a tenant is taking you to the PRTB or if you've decided to waste your time going there as a landlord to get a tenant out. I'm for bribary myself. Or taking the hit maybe. Fingers crossed this day will never come to pass.

15. Property tax is not an allowable rental expense.

Apparently so. We've had reams of arguments on this on here. Or was that the NPPR. Same difference. I claimed the NPPR, poster accountant Tommy McGibney disagrees with me.

16. Water tax (when paid by landlord) is an allowable expense.

I am on non speaking terms with Irish water. You want to see the emails they sent me back, the worst utility I've ever had the misfortune to deal with. I might add to a post elsewhere on this. Let's be clear however, I'm no water protester, they are anarchists. I'm actually all for water charges.

17. When a tenant vacates a property, expenses can be claimed while a replacement tenant is being sought.

Yes. Not sure how revenue treats it if it's a long time. I know from poster on here and elsewhere that some people who bought holiday homes in Leitrim etc that some of them are unrentable.

18. When making a tax return, savings are liable for dirt tax + USC.

What savings?

19. If lump sums have been paid against the mortgage, then mortgage protection policy payments can be reduced.

You mean you'd need less insurance and then you'd have to change your policy. Not a good idea.

20. There is absolutely no government incentive to let a property or to save for the future.

Give us the figures and you'll see if it makes sense. Probably not. If you'd bought in Dublin a couple of years ago, you'd be winning on two fronts, high rents and capital appreciation, and if you'd really timed it right, no CGT. I looked into it, not Dublin, but it still wasn't worth it. But I'm what BB would say is overexposed to one asset class. (only small time mind)

So now in reciprocation, what is it you're planning on doing?

 

[Bronte]

So what your saying is property investment is not worth it , I'd love to do a comparison between direct property investment and investing in a REIT , have you considered REIT's as an alternative , when I am not so busy and move away from my current job/hobby I will certainly do such studies.

Reits's were mentioned on the radio this morning for Dublin. 20% return last year but

1. It was not clear the investors actually got the 20% return.
2. It was not clear how much they actually got over the years invested as an average
3. No talk about how safe an investment it was.

Also interesting was that the REIT said the commercial market would be overstocked by 2018 - how stupid I thought they are building commercial and domesic is what's needed. Also said that it was probably too late to get in now to make the gains that had just been made. Odd I thought to talk down your own product.

As an aside, as we are tallking property, I wondered why Owen O' Callaghan is apparently threatening to leave Cork city if the corporation and council merge. I have my own view, naturally, on that, but it's not for public consumption.

 

[Bronte]

Thanks Gerard123, Fellla and T mcgibney for your suggestions. I can't see why I would employ an accountant or tax advisor to answer fairly basic questions.

My second best of really good advice to you is, hire an accountant ! A good one !

 

[Bronte]

Apologies for trying to stimulate discussion on the property investment forum of Askaboutmoney.
Thanks for the insightful comments.

I believe Noonan is going to try and stimulate the market next budget. So I'm very keen on this naturally. Wonder will it actually be worthwhile. The soundings so far, Focus, McVerry, Dept etc sound all over the place. So I'm expecting them to create a mess. But hope to goodness they won't come up with more idiotic ideas to build apartments in Dongeal or Roscommon.

 

[T McGibney]

I believe Noonan is going to try and stimulate the market next budget. So I'm very keen on this naturally. Wonder will it actually be worthwhile. The soundings so far, Focus, McVerry, Dept etc sound all over the place. So I'm expecting them to create a mess. But hope to goodness they won't come up with more idiotic ideas to build apartments in Dongeal or Roscommon.

Expect nothing. Noonan's various tax stimulation measures in earlier Budgets have all been tokenistic to the point of meaninglessness.

 

[Bronte]

Expect nothing. Noonan's various tax stimulation measures in earlier Budgets have all been tokenistic to the point of meaninglessness.

I'm in a particularly good mood so please don't bring it down Tommy. Surely the CGT thing worked? A bit? I've a few bob earning diddly squat so an incentive woudl be nice.

My own accountant had to split up our revenue accounts from himself to the two of us this month. Ran into a snag doing it online as revenue have an issue with me being abroad so it's now being done manually. Same glitch I ran into this year when I discovered the reason I didn't get my LPT reminder was because they have an issue with me being abroad. Despite all the years of revenue sending letters to us abroad ! Interestingly Irish water, who got my details from either revenue/NPPR/LPT also can't find me, they send the letters to me, but use Co. Dublin/Limerick as the country ! Just telling you in case you've foreign clients!

 

[T McGibney]

My own accountant had to split up our revenue accounts from himself to the two of us this month. Ran into a snag doing it online as revenue have an issue with me being abroad so it's now being done manually.

As non-residents you should have been filing separate (marital status = "single") returns as for some reason Revenue can't handle non-resident returns marked with any other marital status.

 

[Bronte]

I know that but it's the way I started when I left Ireland and revenue told me I had to do it under my OH's name only. So the accountant and I discussed it when I hired him and continued as we knew this day would come. there was an added complication in that revenue issued us a new PRSI no because social welfare went mad with some tenant about some form and it resulted in a new PRSI no, since deleted. (Something like me instead of being Mary Smith and my OH being Brian Jones, getting Mary Jones) . Probably social welfare thought we were tax dodging non resident landlords.

So he's redone 2013 for me. Are you saying my 'civil' status should not be married but should be single?

(Interestingly a sibling ran into a big problem with revenue in relation to marital status a few years ago. Result was that a very senior revenue person advised them to try and get a new PRSI no to sort it out as they couldn't fix it. Something about ticking a box but the box wasn't on the form in a particular year, or something)