# Tax on Rental Property



## Blarney (3 Aug 2005)

Can anyone tell me please is tax on rental income at the marginal rate of 20% or at the higher rate of 42% assuming that you have other income that you would be in the 42% band before the rental income anyway?

Thanks


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## Ham Slicer (3 Aug 2005)

42% is the rate applying


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## delgirl (4 Aug 2005)

> 42% is the rate applying


That's unless one has a spouse who has no other source of income and to whom one could transfer the property title - then the rate applying is 20%!


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## salmon2005 (4 Aug 2005)

Be careful, as if you transfer ownership you have to be living in the house and go through the rent a roon scheme. Other wise rental income no better if your working or not is taxed at 42%. It is classied as 'unearned income' which is always 42%.

Regards
anthony@advicefirst.ie


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## Ham Slicer (4 Aug 2005)

salmon2005 said:
			
		

> It is classied as 'unearned income' which is always 42%.
> 
> Regards
> anthony@advicefirst.ie



Incorrect, it will always be taxed at the marginal rate.


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## DarraghDuane (4 Aug 2005)

I have to say, I think there's a lot of rubbish being spoken in this particular item.

Firstly, the marginal rate is the highest rate at which you pay tax based on your income, so if your income is less than the standard rate cut-off of 29,400 then 20% is your marginal rate. If your income exceeds 29,400 then your marginal rate is 42%.

Rent is not therefore always taxed at 42%, please direct me to the section of the TCA that states that it is and I will eat humble pie.

And what in God's name is all that about having to go through the rent-a-room scheme????


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## delgirl (6 Aug 2005)

> Be careful, as if you transfer ownership you have to be living in the house and go through the rent a roon scheme. Other wise rental income no better if your working or not is taxed at 42%. It is classied as 'unearned income' which is always 42%


 Sorry Salmon2005, but this is incorrect!

To avail of the full E58,800 band at 20% a couple can transfer up to E19,000 of rental or other income to a spouse with no other source of income.  Transferring assets between spouses is exempt from capital gains tax, gift tax and stamp duty.


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## DarraghDuane (8 Aug 2005)

I think you have worded that a bit confusingly Delgirl, although I know what you are trying to get at. You use the expression "transfer income" whereas I think you might mean transfer income source as you cannot assign your income to your spouse. What you can do is use an element of your spouse's standard rate band. If a married couple has one income the standard rate cut-off for the couple is E38,400 (the earner has their own standard band of E29,400 and can use E9,000 of their spouse's E29,400 band. The other E19,400 of the spouse's standard rate band is lost). The only way that the other E19,400 can be used is if the spouse has their own income and to do this they must have an income source, e.g. employment, property from which to derive rental income, etc. You cannot transfer income to the spouse for them to use the remainder of their standard rate band but you can transfer an income source, e.g. a rental property.


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## delgirl (8 Aug 2005)

> I think you have worded that a bit confusingly Delgirl


I used the exact wording from a SBP article by top tax expert Alan Moore. 

I understood what he was referring to - although I see your point that someone else might not.


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## DarraghDuane (9 Aug 2005)

Well the "top tax expert" should proof read the articles that his subordinates are writing for him to ensure that the advice is not open to misinterpretation.


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## Ormond (19 Aug 2005)

Does anyone know when this tax is levied?  Is it at the end of the tax year? ie. December in one lump sum or is it spread throughout the year?


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## WizardDr (24 Aug 2005)

If you are PAYE and this is incidental, its when you make the Case V return, then Revenue will adjust your assessment.
If you are self employed, you pay tax preliminary in October 2005 the same way as everything else (90% of actual liability or 100% of previous) and file the return the following October (I think).


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## DarraghDuane (24 Aug 2005)

In WizardDr's first scenario there, where you are PAYE, I think it's a matter of returning it on a Form 12 and paying your tax by 31 October of the year following the year the income was earned.


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## Friday (14 Nov 2005)

On my tax return last year I put our rental property as solely a personal income. Rental income is circa €15k. The property is in joint names.

I am doing my ROS return this week. Can I return an income for my wife of €15k or just €7.5k?

Thanks


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## asdfg (14 Nov 2005)

Don't forget its the Profit from Rental Income that is taxed, not the rental income.


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## Kitty Kat (14 Nov 2005)

DarraghDunne is 100% correct but don't forget there is also another charge, Rental Income falls into Class S prsi chargable at 5% but in reality if the PRSI class for the person is class A, you cannot really be in two different classes at once so only the 2% levy is chargable.  The eternal PRSI class war !!!!


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## Friday (15 Nov 2005)

Thanks all for feedback.

I am still unsure how much income I should return for my wife, i.e. can it be 100% of the rental income or just 50% of the rental income (as property in joint names)?

Thanks


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## Kitty Kat (17 Nov 2005)

The % of rent is determined by the % of ownership.  

Strictly speaking you should go back and alter your previous return where you stated all the rental income was attributed to you, and you may even be due a refund but this is dependant on your's and your wife's earnings.


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## Friday (17 Nov 2005)

Thanks Kitty.

I note that I should only allocate 50% of the rental income to my wife. She is a homemaker and has no other source of income.

If this is the case then this is not a 'transfer of income source' as referred to earlier in this thread. I thought this thread was saying that in a joint assessment scenario that it was possible to transfer an income source.

DarraghDuane said :

You cannot transfer income to the spouse for them to use the remainder of their standard rate band but you can transfer an income source, e.g. a rental property.

Can you confirm the position.


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## Kitty Kat (17 Nov 2005)

It is correct, you cannot transfer income sources.  I noted that you wife is a home make, if you are getting the home carers credits her rental income will probably exceed the limit for this so you will not be able to claim this any more apart from the first year after she was allowed this.  Also because she has income now in her own right you are entitled to the cut off limit for married with two income as opposed to married with only one income.


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## dam099 (17 Nov 2005)

Maybe I am misinterpreting DarraghDuane's post but I think his point might have been that you cannot transfer rental income arbitrarily from one spouse to the other contrary to the ownership position of the asset but that you can transfer the "income source" which I take to mean transfer the ownership of the asset to the spouse in which case the income would then be theirs.


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## ubiquitous (17 Nov 2005)

> The % of rent is determined by the % of ownership.



There are circumstances where this rule-of-thumb would not always apply.


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## Kitty Kat (17 Nov 2005)

Only ever seen divisions specified under Property Partnership but in general the properties ownership matched, what other circumstances could it happen??


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## ubiquitous (18 Nov 2005)

> Only ever seen divisions specified under Property Partnership but in general the properties ownership matched



Sorry, I don't understand what you are saying here. Can you please clarify?

One common example where someone can be in receipt of income from a property while not owning it is that of a son or daughter receiving rental income from land owned by their elderly parents.


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## Kitty Kat (21 Nov 2005)

Some property partnership are set up whereby a higher % of the profits (as opposed to rent) is deemed to go one party generally where this person has a more active role in management.  

Never seen one where the son or daughter receives gross rent from land not owned by them.  In the eyes of the Revenue this rent shoudl be taxed in the hands of the parents.  After that it is up to them what they do with it, appropriate taxes apply if applicable.  I would say that to do this the revenue would have to grant approval but I cannot see any basis but obvously each personal case is different.


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