Clarification on renting my home

Hi,

I've read a number of posts on the topic of rental income and would appreciate clarification on what I've picked up.

I own a house. Today I moved out of my house and a tenant moved in. In 2 months I will leave the country and return next August.

I pay €718 in interest on my mortgage every month.
It cost me €350 to rent the house through an agent.
The tenant will pay €650 per month.

€650 x 12 months = €7800 (rental income)
€718 x 12 months = €8616 (interest on mortgage)
€350 one off payment (I hope)

Am I correct when I write:

I am no longer eligible for TRS against my mortgage and need to contact the revenue to declare same?

However to replace the TRS I'm loosing I can claim back some of the interest I'm paying against the rental income?

I apply for this interest relief by contacting the revenue?

I will not have to pay any tax on the rental income as it is less than €10,000?


Have I got that right?

What I can't see is how I calculate how much interest relief I will get against the rental income. This is very important as I need to find out if I will be loosing alot of money when I own up to the revenue and loose my TRS.

Many thanks for your expertise.

You are mixing up a lot of concepts there. The €10k is no longer relevant to you as you will not be living in the house - that only applies to the "rent-a-room" scheme, which doesn't apply once you move out.

You can claim 100% of your mortgage interest (plus your rental costs) against rental income, provided that the mortgage was used to purchase the rented property. I don't know of any ceiling to that. You will no longer be eligible for TRS and yes, I suppose you should tell revenue (don't know the process of who communicates what to whom, but that's the safest bet). You may also have to tell your mortgage provider as they may have given you your mortgage based on it being a PPR and you may have to pay a higher interest rate as it will become an investment property.

In order to claim your interest relief, you fill it in your form 12 tax return for 2008 (and 2009 when it comes to it).

Sprite

cailín deas said:

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I am no longer eligible for TRS against my mortgage and need to contact the revenue to declare same?

Click to expand...

Yes, you will not be eligible for TRS against the mortgage.

cailín deas said:

...
However to replace the TRS I'm loosing I can claim back some of the interest I'm paying against the rental income?

Click to expand...

You can claim all of the interest on the loan against rental income provided the full loan amount has been used to purchase/renovate the property (i.e. you can not claim relief for interest paid on a top-up that went towards personal debt consolidation, for example).

cailín deas said:

...
I apply for this interest relief by contacting the revenue?

Click to expand...

As far as I know you don't need to contact Revenue, you just inform your accountant (if you have one) of the amount of interest involved and s/he will take it into consideration.

cailín deas said:

...
I will not have to pay any tax on the rental income as it is less than €10,000?

Click to expand...

No, this is incorrect. The €10,000 limit is for "Rent-A-Room" only, in other words you have to be living there also. However, if you are overseas there may be concessions. In particular, if you are travelling abroad to work for your employer then you may be entitled to additional relief. However, from your figures above, your rental income will be less than your expenses, so you will be making a loss and therefore should not have to pay any Income Tax on the rental income.

cailín deas said:

...
This is very important as I need to find out if I will be loosing alot of money when I own up to the revenue and loose my TRS.

Click to expand...

Then I suggest you very quickly talk to a professional tax adviser.

You do not say how long you own the property or if stamp duty was paid. If you own more than two years then you have nothing to worry about. On the other hand if you do not you and got an exemption-ftb or owner occupier, you are have to pay the revenue the amout that would have been due at the time of purchase. This is due to be paid no more than one month from the date the tenancy started.
You also need to register the tenancy with the PRTB in order to offset your interest against income.
Plenty of thread on here to help you, but I recomend you talk to an accountant.

You can also carry your loss for this year forward. Really important you register with the PRTB as otherwise the mortgage interest is not deductable. You have a lot more to deduct from the rent, house insurance, wear and tear, maintenance, gardening costs. You may not have to tell your bank anything particularly if they would increase the interest rate you pay but you must tell your house insurance company as they may not be in the market for rental income property.

Many thanks for all your comments. I have to do some further investigating.