# If I make a loss on my rental income, do I have to pay tax?



## mrso'brien (17 Nov 2009)

Hi,

I am thinking of renting out a house I bought but the rental income that I get won't cover the mortgage.

Will I still have to pay tax on this property (apart from the 200 Euro property tax)?

The rent will be about 500Euro short of the mortgage each month.

Thanks


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## Berni (17 Nov 2009)

You can only offset 70% of the interest portion of your mortgage payment, so quite possibly you will have to pay some tax.


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## Howitzer (17 Nov 2009)

Berni said:


> You can only offset 70% of the interest portion of your mortgage payment, so quite possibly you will have to pay some tax.


75% of interest portion of the mortgage payment.


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## mrso'brien (17 Nov 2009)

I'm sorry but I don't understand what you mean by 'interest portion'. I really am quite clueless about this!

My mortgage is 1800 per month and the rent I will get is 1500 Euro per month...can someone explain simply to me how to calculate what I will owe, if I owe anything?

Also, how do I tell Revenue I will be renting the house? Is there a specific form to fill in?

Thanks


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## Peadar (17 Nov 2009)

You don't calculate if you make a rental profit or loss based on your mortgage payment.

You calculate it based on the interest part of your mortgage payment.

E.g.

Rent 1500
Mortgage 1800
Mortgage Interest 1400.
Mortgage Interest x 75% = 1050.
Mortgage Principal 400.

Rental Profit: 450.

You would actually be making a profit of 450 a month for tax purposes, you can also deduct other expense in order to decrease your tax bill.

Peadar


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## WaterSprite (17 Nov 2009)

Normal mortgage payments are split into an amount that goes against capital and an amount that goes in interest.  For example, if the mortgage is new and your repayments are 1800 a month, the interest portion could be 1200 and the capital repayment portion 600.  Your mortgage provider will give you a statement at the end of the year showing what portion of your repayments is interest and what is capital.  If your mortgage is with NIB (not sure if the other banks do this), you can also access this online on a month-to-month basis.

All rental income is judged to be "income" as normal and you are taxed on this.  You can, however, deduct expenses against rental income before you apply your normal tax rate.  One of those allowable expenses is 75% of the interest portion of your mortgage.  So, taking the example above, if your rental is 1200pm and the interest portion of your (1800pm) mortgage repayment is 1000pm, you can deduct 750 of that (75%) from your rental income and pay tax on the difference (1200-750=450pm).  So, you pay tax on 450pm.

There are other expenses that can be deducted from rental income, such as your PTRB fee, insurance, repairs etc.

You need to stop your Tax Relief at Source on the property (by informing Revenue) and you need to register with the PTRB before you rent the property.  You need a BER cert prior to first rental.  Keep all your receipts.

I think you need to have a chat with an accountant to get information on this.  As you say, you're not well up on what needs to be done and there's only so much information that an internet message board can give you.


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## delgirl (17 Nov 2009)

Peadar said:


> You would actually be making a profit of 450 a month for tax purposes, you can also deduct other expense in order to decrease your tax bill.


The other expenses include:-

- registration fee with PRTB - mandatory
- building and contents insurance
- landlord's liability insurance
- Repairs and maintenance (must have receipts cannot make a deduction for work you do yourself)
- wear and tear to furnishings and fittings @ 12.5% per annum
- sundry expenses (stationery, printing, photocopying, rent book, postage, etc.)

There's a good lease agreement [broken link removed], which you can download and adapt to your own needs.

Make sure you read all the info on the PRTB website so you don't fall foul of them in case of a dispute.

The above will easily wipe out your small profit, so you won't have to pay any income tax.  Even though you don't anticipate a profit, you will, however, need to register for self-assessment with Revenue.


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## z107 (17 Nov 2009)

Excellent post Delgirl. That should be a keypost or a sticky or something.


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## delgirl (17 Nov 2009)

Thanks Upsidedown, crossed with WaterSprite's which is also very good.


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## mrso'brien (17 Nov 2009)

Thank you all very, very much. There is fantastic information here. Really appreciate it. I honestly didn't have a clue what I was supposed to do. Thanks.


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## SLS (17 Nov 2009)

Just another quick question, if you move overseas, can you claim some of the travel say once a year to visit the property to ensure its general maintenance/wellbeing. I know of other countries with this rule, just wondered if Ireland was the same..


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## ardman (19 Nov 2009)

Howitzer said:


> 75% of interest portion of the mortgage payment.


Open to correction on this but am I correct in saying that 100% of interest is allowable for first 4 months of 2009 (when budget took place) and 75% for remainder of the year?


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## mathepac (19 Nov 2009)

SLS said:


> ... can you claim some of the travel say once a year to visit the property to ensure its general maintenance/wellbeing...


No from Revenue's perspective you have the choice of not moving or of appointing a local agent.

BTW, if you do not appoint a local agent, your tenant is obliged to with-hold 20% of the rent and remit it to the Revenue.


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## Pauley (26 Nov 2009)

Great info in this thread...

re appointing an agent if going abroad: If I appoint a brother or sister as an agent (i.e. a rent collector and point of contact in case of a problem) and they are PAYE workers, does it affect their tax return in any way? - Just where is the rent they collect on my behalf reported (on their return?) and if I pay them a small fee for doing this, does that complicate their otherwise straightforward PAYE return?

Also, I noticed this on myhome.ie
"If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)."

I never heard of this anywhere else and I can't find a reference to it on revenue.ie or elsewhere.

Is this correct? If so how does the tenant pay/who collects? - what paperwork is involved on their or their landlords (or their agents) end?


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## mathepac (26 Nov 2009)

Pauley said:


> ... If I appoint a brother or sister as an agent (i.e. a rent collector and point of contact in case of a problem) and they are PAYE workers, does it affect their tax return in any way? ...


Not unless you pay them.


Pauley said:


> ... Just where is the rent they collect on my behalf reported (on their return?) ...


It isn't because presumably they'll lodge it directly to your account if you leave them account details or a lodgement book.

Also remember to leave your PPS number and address for your tenants who will no doubt want to claim tax-relief on the rent they pay...


Pauley said:


> ...  and if I pay them a small fee for doing this, does that complicate their otherwise straightforward PAYE return?...


No, they just enter the small fee as untaxed income on their tax return.


Pauley said:


> ... Also, I noticed this on myhome.ie
> "If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)." ...


Sorry,  I can't help you here


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## Bronte (26 Nov 2009)

Pauley said:


> Also, I noticed this on myhome.ie
> "If the annual rent exceeds €19,046.71 [thats €1587.23/mth] the tenant must pay 1% Stamp Duty of the annual rent (plus a €12.70 stamping charge)."


 
I don't know what this refers to but it has nothing to do with the normal renting of houses/apartments.  It's probably something to do with leases of commercial premises (shops etc)


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## murphaph (26 Nov 2009)

If you have a relative etc. acting as agent, they should request a new (secondary) PPS number for this purpose.


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## Breninio (26 Nov 2009)

www.revenue.ie/.../tax-*registration*-*collection*-*agents*-march2009.pdf

Just to note, there is a specific registration form for registering the collecting agent (see above link). As mentioned by other poster, a separate PPS number will issue to the collecting agent and a tax return (in my experience, Revenue issue Form 1 Tax Returns to Collecting agents) will be filed under this number each year.


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## Pauley (26 Nov 2009)

...Cheez they certainly know how to complicate things. I can't inflict that sort of overhead on my siblings! So either the tenant becomes liable and witholds 20% of the rent or my appointed agent becomes the rent recipient and has the joy of filling out another tax return. What a mess...


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## SLS (27 Nov 2009)

For those of us that aren't lucky enough to have siblings that can act as agents, how do you go about finding a "good" agent?
All of the discussions on this site and others whenever this discussion starts basically just state very usefully, stay well away from them.

Not really an option when you are moving overseas. We are hoping to go in next 6 months so just wondering where to start looking?


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## Bronte (27 Nov 2009)

Pauley said:


> ...Cheez they certainly know how to complicate things. I can't inflict that sort of overhead on my siblings! So either the tenant becomes liable and witholds 20% of the rent or my appointed agent becomes the rent recipient and has the joy of filling out another tax return. What a mess...


 

All you have to do is fill out everything for the sibling.  Pay your sibling as you would a professional, renting is a business treat it as such.  

Do not let a tenant withhold 20% of the rent ever.


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## delgirl (27 Nov 2009)

SLS said:


> For those of us that aren't lucky enough to have siblings that can act as agents, how do you go about finding a "good" agent?
> All of the discussions on this site and others whenever this discussion starts basically just state very usefully, stay well away from them.
> 
> Not really an option when you are moving overseas. We are hoping to go in next 6 months so just wondering where to start looking?


If at all possible, avoid agents. We also had to go abroad, didn't have anyone to look after our property and hired a very reputable local agent with a large national firm. 

They stole 4 months rent, pocketed our tax return and left us with tax to pay on rental income that they had collected the following year. 

The branch it transpired was a franchise and they went bust. They knew for about 5 months that they were going under and lied to us constantly that the rent had been transferred to our account, or that there had been a mistake at the bank, or that the manager was dealing with it and wasn't available or was out sick, etc.

When you're on the other side of the world, this can be extremely distressing so if you possibly can, get someone you know and trust to look after your property.

The next agent we hired after this disaster was equally as bad allowing tenants into the property without checking their faked references, the tenants subsequently lived in the house rent free for 6 months until we managed to secure a very expensive court order and bailiff's order to get them out.

I would never, ever use an agent again.


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## SLS (27 Nov 2009)

delgirl said:


> If at all possible, avoid agents. We also had to go abroad, didn't have anyone to look after our property and hired a very reputable local agent with a large national firm.
> 
> They stole 4 months rent, pocketed our tax return and left us with tax to pay on rental income that they had collected the following year.
> 
> ...



Thanks for your response but not really helpful. If you are relocating to the other side of the world, you need a local agent. How about naming and shaming the bad ones so that people avoid them ..


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## delgirl (28 Nov 2009)

SLS said:


> Thanks for your response but not really helpful. If you are relocating to the other side of the world, you need a local agent. How about naming and shaming the bad ones so that people avoid them ..


Sorry that you didn't find my response helpful.

The aim was to warn you of the potential pitfalls when dealing with agents based on personal experience with two separate agents.  

If you're off to the other side of the world, it's an easy option to appoint an agent, but if a close family friend or relative can do the job for a fraction of the fee you would pay an agent, I would choose this option every time.

If you are in the South Dublin area, you might want to try Daphne Kaye in Foxrock.  We rented from them when we came to live in Dublin - they are very thorough in their vetting process and property inspections and act very much in the landlord's interest.


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## bauble (21 Dec 2009)

Hi, I have a similar query on the 20% withholding tax on rent paid to non-resident landlords. My sister is currently renting her house for the last year but has moved abroad. Would she be deemed non-resident for this immediately? Are there rules about being non-ordinarily resident for three years before becoming non-resident? Thanks


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## dewdrop (9 Feb 2010)

If the loan used to buy the property was taken out before 7/4/2009 is 100% relief than allowed in respect of the interest?


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## WaterSprite (9 Feb 2010)

dewdrop said:


> If the loan used to buy the property was taken out before 7/4/2009 is 100% relief than allowed in respect of the interest?



No - it's not to do with when you take out the loan, it's to do with the tax year you are filing for.  Since April 7, 2009, you can only claim 75% of the mortgage interest, regardless of when you take out the loan.  You can claim 100% of mortgage interest paid prior to April 2009.


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## dewdrop (9 Feb 2010)

Thanks Watersprite


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