equity release - tax relief

R

rush

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I am purchasing an investment property for 270K.
To fund the purchase I am taking an equity release of 250K from my PPR.

Can the interest on this loan be off set against rental income. I understood
that it was until someone told me that the mortgage had to be on the investment property to qualify.
 
That someone is correct.
Maybe you can get a 100% loan on the investment property and use your PPR as security.
 
Hi Woods

On the revenue.ie site it states as a deductable expense against rental income[broken link removed]
[broken link removed] for the purchase, improvement or repair of certain properties'

It doesn't say anything on how you borrow the money. I want to release equity in my own home to fund the investment property. Why doesn't that meet the criteria - [broken link removed] for the purchase, improvement or repair of certain properties'

Thanks
 
I can tell you that my accountant does not let me do it (and I have tried). He tells me that I can only write off the interest on borrowings against the income from a particular building if I have borrowed it against that building.
 
Woods

Your accountant is incorrect. The only test is whether the money is borrowed for the purchase of the building.

If you borrow money to buy an investment property and it is not secured on any property, it is allowable.

If you borrow money to buy an investment property and it is secured on your home, it is allowable.

If you borrow money to buy a home, and secure it on your investment property, it would not be allowable.

Your accountant is incorrect and many accountants and bankers get this wrong. But the Revenue and rush are right.

Brendan
 
Hi Brendan,

I have a new mortgage offer on my ppr.
As expected it doesn't sate anything about the investment property.

At tax return time, how do you prove (or do you need to prove) to revenue
what interest was paid in respect of the loan for the investment property i.e.
I will only have statements for a mortgage on ppr.

THanks
 
rush said:
I am purchasing an investment property for 270K.
To fund the purchase I am taking an equity release of 250K from my PPR.

Can the interest on this loan be off set against rental income. I understood
that it was until someone told me that the mortgage had to be on the investment property to qualify.
Click to expand...

Why would anyone risk their PPR for an investment property in such an over inflated market as we are in at the moment,to me this is just madness.
 
rush

You can ask your mortgage provider to give you two separate accounts on the same mortgage. The interest paid on one will be allowed. You should also make sure that any capital repayments should be made against the home mortgage and that the investment mortgage is interest only as you get no tax relief on the home mortgage interest.

Brendan
 
Brendan said:
Woods

Your accountant is incorrect. The only test is whether the money is borrowed for the purchase of the building.

If you borrow money to buy an investment property and it is not secured on any property, it is allowable.

If you borrow money to buy an investment property and it is secured on your home, it is allowable.

If you borrow money to buy a home, and secure it on your investment property, it would not be allowable.

Your accountant is incorrect and many accountants and bankers get this wrong. But the Revenue and rush are right.

Brendan
Click to expand...
Sounds like you need an uegent meeting with, and maybe a replacement for, your existing accountant woods!
 
ClubMan said:
Sounds like you need an uegent meeting with, and maybe a replacement for, your existing accountant woods!
Click to expand...


I agree. Woods's accountant is definitely incorrect.
 
thanks for replies, two accounts on mortgage makes things clearer. However
mortgage is still on ppr, what document shows to revenue the money was used to buy investment property?
Thanks
 
Presumably there is a (for example, banking) paper trail from the cheque for the mortgage secured on the PPR but used to purchase the investment property all the way to payment for the latter?
 
clubman, thats what I was going to use if necessary. I was going to get my solicitor to detail transaction in a letter also. This might suffice if needed.

Thanks
 
Does the tax offset still apply if the Equity release is used to buy a foreign investment property ?
 
Yes it does(for Hungarian property anyway!), but the interest offset can only be offset aganst foreign rental income and not against any rental income you may be receiving in Ireland form Irish properties(different cases of rental Income).

Check out IT70 on revenue's website it has an outline of how it works.
 
Could anyone give a working example of the tax returns on a similar transaction to rush? Say his PPR is valued at 350K and he has a 40K mortgage on it getting TRS. He borrows 250K as equity release for the investment property of 270K. He has a new 290K mortgage. Does he retain 40/290 x interest paid as TRS on the PPR and the 250/290 x interest against his rental income of the invest prop + expenses? Is it that simple?
 
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