Divide mortgage between rental & family home?

[Murt]

Hi, I need help. We have a home in Dublin which we are now renting for €1000 per month. We have moved to Galway and are in the process of buying our family home here. We need to restructure mortgage on Dublin and put a mortgage on property in Galway. Mortgage outstanding on Dublin in €28,000. We need €380,000 to purchase new property. What is the best way from tax relief point of view i.e. offsetting rental income against mortgage interest to do this. Tax office is telling different things everytime I ring. One said you can offset full amount against rental income. Rang today and they said no, only family home can be offset. Any views would be appreciated.

 

[Helen]

I've looked into this briefly and I've been advised that you cannot offset interest on mortgage raised to purchase a second home. So no matter what you do, the only interest you can offset against rental income will be the interest on the 28000 remaining.

I think the important quote in revenue documentation is "the construction, purchase, or repair of rented residential premises"

If the money is not used for any of these purposes then it is not allowable.

 

[car]

I've looked into this briefly and I've been advised that you cannot offset interest on mortgage raised to purchase a second home. So no matter what you do, the only interest you can offset against rental income will be the interest on the 28000 remaining.

I think the important quote in revenue documentation is "the construction, purchase, or repair of rented residential premises"

If the money is not used for any of these purposes then it is not allowable.

As OP, Am currently in the process of moving out of current home to new one and will turn old home to investment prop. Have taken out new (much increased figure from old mort) interest only mort. on the old one to get money for new house and was told by financial advisor that the new interest only payment would be FULLY allowable to be offset for tax after I specfically asked her that question, which is at odds with what Helen is saying above. Do I need a new financial advisor? Will call tax office anyway.

 

[Sarah W]

Do I need a new financial advisor?

Yes!

You can only offset the interest on monies used to "buy, improve or renovate" the property (along with other expenses) as a deductible expense against the rental income.

Sarah

www.rea.ie

 

[Murt]

Thanks for your help. Have divided mortgage between two properties as advised by financial advisor and TRS Section, the bigger portion on our family home as you can claim up to €5080 mortgage interest relief on that property being the principal private residence. Hope we have done right!