Is this a stupid question - tax on rent.

[danboo]

I was in the place known as the pub and a friend and I realised we had a completely diffrent take on tax liability on rent.

My belief was that if you had a second property and was getting rent of 1,000 and your mortgage was say 2,000, you paid tax at your rate, so - say you were left with 580 rent. then you had to cover the other 1,420 yourself. My friend reckons you don't have to pay tax on the rent.

Did I misss something here? By the way - I don't have a second property.

 

[xeresod]

You are correct, not your friend. Although allowable expenses such as mortgage interest, management fees, wear & tear, etc, are taken into consideration too.

 

[G123]

rent of 1,000 and your mortgage was say 2,000, you paid tax at your rate, so - say you were left with 580 rent

Eh, am I missing something here?

I would assume that a good portion of the mortgage payment was interest - say €1,000 plus. In this case I thought that you would not be paying any tax.(?)

Payments to the principal of the loan are not allowable

 

[asdfg]

[broken link removed] might explain what is allowed against tax on rental income

 

[ClubMan]

See the AAM Property Investment FAQ.

 

[bazermc]

getting rent of 1,000 and your mortgage was say 2,000

you pay tax on the 1,000 less allowable expenses which includes interest, repairs, insurance and capital allowances on fixtures and fittings if furnished by the landlord.
the mortgage is a capital repayment and not an allowable deduction against the rents received although it is cashout

 

[asdfg]

the mortgage is a capital repayment

Strictly speaking the mortgage is a payment made up of interest & capital.

Just to be clear the interest element is allowable against rental income.

 

[ClubMan]

And there is an interesting thread about the advantages of interest only mortgages for investment properties in the Property Investment key topics thread.