tax on rental income in primary residence

[eddiemcnally]

I've searched a few of the threads and guides in this section and the property one and couldn't find the answer to my Q.

I have my own 3 bed appartment. It's my primary residence and I have rented out 2 rooms. DO I have to pay tax on the rental income - its about 10k. I rang the revenue about a year ago and was told I don't.
However I've heard contradicting views - some saying I don't pay tax if the rental income is less that the yearly mortgage repayments, which is my case i.e I'm not making a profit.
I've also heard that I do have to pay tax put that I can write off any expences (domestic appliances, interior decor ect) against my tax bill. If this is the case can I write my mortage insterest off the rental tax as well?

 

[ClubMan]

I have my own 3 bed appartment. It's my primary residence and I have rented out 2 rooms. DO I have to pay tax on the rental income - its about 10k. I rang the revenue about a year ago and was told I don't.

This is wrong. The owner occupier rent a room scheme allows an owner occupier to rent rooms in his/her PPR and collect up to €7,620 in rental income with no income tax (must still be declared though), CGT or stamp duty implications. If you exceed this amount then you are treated as an investor so that all income (less allowable expenses) is assessable for income tax, some portion of any resale gain will be assessable for CGT and if the rental happened within 5 years of purchase of the PPR then a clawback of SD applies from that date. The Property Investment FAQ summarises the tax treatment of rental properties.

some saying I don't pay tax if the rental income is less that the yearly mortgage repayments

No - this is not correct.

I've also heard that I do have to pay tax put that I can write off any expences (domestic appliances, interior decor ect) against my tax bill. If this is the case can I write my mortage insterest off the rental tax as well?

You can write off certain expenses including mortgage interest against rental income although you cannot also claim owner occupier mortgage interest relief on the same interest.

I'm not 100% sure how things work when you are an owner occupier landlord who cannot avail of the rent a room scheme because the rental income exceeds the threshold but you definitely need to sort out your tax situation here as a matter of urgency.

 

[eddiemcnally]

Thanks clubman. DO I need a tax advisor or accountant to do this or should I have a crack at it? Who would people recommend? Would I have to back date payments or will I do the returns this Nov just for 2005? I wasn't actually aware that I had to pay any tax - my tax knowledge is basic!! I have to declare tax on dividends as well hence my reason for leaning towardsa tax advisor.

 

[ClubMan]

Thanks clubman. DO I need a tax advisor or accountant to do this...

I wasn't actually aware that I had to pay any tax - my tax knowledge is basic!!

Given this juxtaposition of comments I'd be inclined to recommend that you get a professional who knows what they're doing.

 

[Howitzer]

It's of no help to you now but if you'd simply charged less rent in the first place then you wouldn't have any tax liabilities, especially since you're currently receiving a sum which is only about 2K over the limit.

 

[DonKing]

It's of no help to you now but if you'd simply charged less rent in the first place then you wouldn't have any tax liabilities, especially since you're currently receiving a sum which is only about 2K over the limit.

You could always give your tenants a refund for previous years to get you under the rent a room threshold, and reduce their rent going forward. I'm sure your tenants would be delighted!