Rental Income Relief vs TRS?

Hi Everyone,

I plan on moving abroad next year and renting out my apartment.

As my apartment will no longer be my primary residence when I move, I realise that I may not be entitled to mortgage tax relief anymore, and will consequently have to apply for rental income relief.

I'd be grateful if anyone can advise me on what the difference is between TRS and rental income relief in terms of what difference it will make to me financially.

If I am no longer entitled to TRS, will rental income relief provide me with the same amount of financial relief as TRS?

Thanks for your help!

Paul

Tax relief at source on you PPR is calculated as follows (maximum relief due):
First Time BuyersStatusCeilingTax Rate Max. relief availableSingle€10,000@ 20%€2,000Married / Widowed €20,000@ 20%€4,000Non-First Time Buyers StatusCeilingTax Rate Max. relief availableSingle€3,000@ 20%€600Married / Widowed €6,000@ 20%€1,200

The max relief available is the cash value to you each year. If your interest payments are lower accordingly the relief available is lower.

If you rent out the property the full amount of interest paid can be set against your rental income: e.g

Rental income received per anum (assuming 12 months) 12,000
Interest payments per anum (assuming 12 months) 8,000

Tax payable on rental income 4000 @ 20%/41%.

Download a copy of IT70 from www.revenue.ie. This shows what other expenditure can be claimed as a deduction against Rental Income thus reducing your liability even further.

Note that Mortgage Interest can only claimed as a deduction against Rental Income if you are registered with prtb. www.prtb.ie

Paulk said:

As my apartment will no longer be my primary residence when I move, I realise that I may not be entitled to mortgage tax relief anymore, and will consequently have to apply for rental income relief.

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You don't apply for "rental income relief". You offset qualifying mortgage interest against rental income when doing your rental income tax return. Note that there is a strong case to be made for having an interest only mortgage on a rental property. See the Property Investment key post on this issue.

I'd be grateful if anyone can advise me on what the difference is between TRS and rental income relief in terms of what difference it will make to me financially.

If I am no longer entitled to TRS, will rental income relief provide me with the same amount of financial relief as TRS?

Click to expand...

Based on these comments I would strongly urge you to get independent, professional advice on the investment and taxation implications of renting out your former PPR before making any decisions. For example have you crunched the numbers to assess the viability of this strategy and ascertained that it is the best/most appropriate investment option for your specific circumstances?

Thanks a mill for the replies.

As you can tell, finance is not my forte so I will follow your suggestion and seek professional advice.

ClubMan said:

Note that there is a strong case to be made for having an interest only mortgage on a rental property.

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Just as an aside, it might be worth noting that many people (myself included) disagree strongly with this viewpoint.

You are no longer entitled to TRS when you rent out your apartment as an investment property and just need to notify the Revenue to stop the TRS when you begin renting it.

The biggest tax relief you will get against your rental income is the mortgage interest relief. You are entitled to claim the interest portion of your mortgage repayments as a rental expense provided you register with the PRTB. So make sure you don't forget to do this when the time comes to rent out your apartment!

Thanks for the posts.

Overall, will the tax relief which I'll get against my rental income financially equate my TRS?

You have to work out the numbers - really you need professional advice here.

Your max TRS is €2,000 a year (for a single person - €10k@20%). If you earn in the higher tax bracket, then you will be offsetting more (than you get via TRS) against rental income if you are paying more than approx €5k a year interest (5k @ 41%). If you are in the lower tax bracket, then you will need to be paying €10k in interest a year to "make" the same as TRS. Whether or not the amount you can offset against tax for your investment property will equal your TRS is something only you can answer when you work out the numbers - no-one here can answer that in the absence of specific detailed figures particular to your circumstances. I think a visit to a financial advisor will help you clear things up pretty easily.

Sprite