Rental Account query: calculating interest ..

[Schillachie]

Hi Folks,

I have a query on calculating the interest cost for a rented house.

I have one commercial loan for 85% of the house for which I have an interest cert.

However, as the house cost another 15% plus another few thousand to finish, my lender gave me a top-up to my existing primary home loan. Let's say that topup loan is 50K and 25K of this paid for 15% of the house as mentioned, can I include half the interest on this top up with the interest of the commercial loan on the yearly rental account return.

I would imagine that I should be allowed as without it, I couldn't complete the purchase.

Thanks, Schillachie

 

[Graham_07]

It it is how the funds are allocated rather than how they have been financed that counts so a loan used 1/2 for personal and 1/2 for a rental property would normally have the relevant proprotion of its interest allowable against rental income ( assuming PRTB/Revenue registration requirements have been complied with ) .

It is important to note that if the top up loan has been registered for TRS then the TRS amount needs to be adjusted downwards to reflect the fact that not all of the loan was used on the PPR.

 

[Schillachie]

Hi Graham,

That clears that up. I'll have to adjust it down slightly as suggested.

Thanks, Schillachie

 

[Graham_07]

Hi Graham,

That clears that up. I'll have to adjust it down slightly as suggested.

Thanks, Schillachie

No problem. Remember TRS is allowed at 20% while interest allowed against rental income has a potential for 41% tax +PRSI/Levy depending on the marginal income of the taxpayer so having the relevant interest allowed against rents may give greater overall tax benefits.