Tax Implication - Rental of PPR

Hello

An acquaintance of mine if relocating within Ireland for a period of one year. He intends to rent out his house (principal private residence) and rent elsewhere. He does not have any other investment properties.

Are there any tax implications for him, regarding the rent received, considering thet he himself will be paying rent on another property. Is it treated as income in the same way as an investment propery? (This is excluding any revenue tax credit that he will receive).

Regards

SM

Square Mile said:

Are there any tax implications for him, regarding the rent received

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Yes - some or all of:

1. Clawback of stamp duty if he rents a property originally bought as an owner occupied PPR within 5 years of purchase (changed to 2 years in Budget 2008)
2. Most likely CGT on some portion of any eventual resale gain (partial PPR relief will apply in respect of the time that it was his PPR).
3. Rental income assessable for income tax
4. Allowable expenses (including mortgage interest) can be offset against rental income when working out liabilities.
5. No longer allowed to claim owner occupier mortgage interest tax relief on the mortgage.
6. He must register with the PRTB.

See also the FAQ:

Property Investment FAQ

He should get independent, professional advice on the investment and tax implications of going down the landlord road.

considering thet he himself will be paying rent on another property.

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This is irrelevant although he can claim the private rental accommodation tax credit.

Thanks Clubman

He bought his house second hand about 10 years ago and paid stamp duty at the time.

He may decide to sell his property and rent in the new location. His house may take some time to sell however, during which time, he will renting in the new location.

Do you know whether this overlap will affect the tax situation?

Many thanks

SM

Square Mile said:

He bought his house second hand about 10 years ago and paid stamp duty at the time.

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OK - so no SD implications by the sound of things.

He may decide to sell his property and rent in the new location. His house may take some time to sell however, during which time, he will renting in the new location.

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If he sells the former PPR within a year of vacating it then there should be no CGT implications as far as I know. If he holds it longer then some portiong of any resale gain will be assessable for CGT. Any rental income will still be assessable for income tax as normal.

Do you know whether this overlap will affect the tax situation?

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He should still get independent, professional advice.

Is there any stamp duty payable in following circumstance:
- a person previously purchased their first home with a friend and did not have to pay stamp duty as they were both first time buyers
- 3 years later he/she is going to buy a second house with their fiancee which will become the family home; full stamp duty will be paid on this purchase
- is there stamp duty payable on the first home if it is not sold?

Beggars said:

Is there any stamp duty payable in following circumstance:
- a person previously purchased their first home with a friend and did not have to pay stamp duty as they were both first time buyers
- 3 years later he/she is going to buy a second house with their fiancee which will become the family home; full stamp duty will be paid on this purchase
- is there stamp duty payable on the first home if it is not sold?

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No - but if it is rented out then that's another matter.

I have been going through the various forums and threads on the question of renting out one's PPR, as I am contemplating going abroad for 2 years, and renting out my PPR while I'm away.

I'm a bit horrified at all the tax implications. I am planning to work as a volunteer for a charity and so will have virtually no income while I'm away, and the rental income will only just cover my mortgage - am I STILL liable for tax? A lot of my mortgage is interest, so I see that I can write that off, but I'm still not very chuffed about it all.

And I read with even more horror about the Stamp Duty clawback. I bought my house just under 4 years ago (and as a FTB did not pay SD), so it looks as if I will be in the frame for that too. How much is that likely to be?

I think I'm going to get myself an accountant ...

GrainneM said:

I'm a bit horrified at all the tax implications. I am planning to work as a volunteer for a charity and so will have virtually no income while I'm away

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Get independent, professional tax advice in case you can somehow (legitimately) retain your PPR status in this situation (albeit probably not renting the property out other than under the rent a room scheme).

and the rental income will only just cover my mortgage - am I STILL liable for tax?

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The fact that he rental income may not or only just cover the mortgage is irrelevant to the tax treatment. What matters is rental income less allowable expenses (including mortgage interest). If this is greater than 0 then the remainder is assessable for tax.

And I read with even more horror about the Stamp Duty clawback. I bought my house just under 4 years ago (and as a FTB did not pay SD), so it looks as if I will be in the frame for that too. How much is that likely to be?

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Whatever an investor would have paid in SD on the purchase of your property.

I think I'm going to get myself an accountant ...

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Good idea.