Taxation Q for new investor due to Marriage

L

Listenhere

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My wife and I recently got married (April this year). Now we have found ourselves in a property investment situation due to our two properties.

I am looking for some general information on how to proceed.

The situation is this. We both owned one property each before we got married. She a house and me an apartment. After we got married we both moved into her house and rented out the apartment.

As I understand it, my owner occupier property has now become a investment property!

I am at a bit of a loss as to what we/I need to do and what this means to our tax situation.
Here are some questions.

1) How and when do I have to declare this to the tax authorities?

I understand that I will have to pay tax on the rental income but that I can claim some of this back through rental expenses.

2) What does this now mean for tax when I go to sell the property? (i.e. capital gains etc.)

3) What other things do I now need to do and consider?

Thanks in advance for any advice that can be given.
 
there are lots of posts on these issues so you can get more details by searching but in summary they are:

1. Possible stamp duty clawback - if you lived in your owner occupied apartment for less than 5 years. this is due within 1 month of renting it out - there are penalties and interest applied so make this first priority.

2. Register the tenacy with the PRTB - this is required.

3. Tax on rental income - this is due in October 31st of the following year. You fill out a FORM 12 (or form 11 depending on who you ask) to declare it. You calculate rental income minus interest paid on mortgage, minus any expenses eg insurance, utilities, maintenance, repairs. You can also deduct 1/8th of your captial allowances (fixtures and fittings).
You pay 42% tax on the total profit, plus 2% health levy. From 2006 onwards I think you have to be registered with the PRTB in order to claim back the mortgage interest.

4. Check out that your insurance on your rental property is still valid now that you have the place rented out.

5. When you sell it, you pay Capital Gains Tax on the profit. this is pro rata based on the proportion of time you rented it out of the total time you owned it. You can deduct Stamp Duty (I think), and solictors fees (cost of selling) from the profit to reduce the tax bill.

I got an accountant to help me do my returns this year. they are charging 195 euros plus Vat which I think is well worth it for peace of mind!
 
Baloney

Excellent reply, but one correction

Shouldn't preliminary tax on rental income be paid by the 31 October of the year in which it arises? So if you have rental income in 2006, you should pay preliminary tax by 31 October 2006, not 31 October 2007?

It may be different in the first year, but I don't think so.

Brendan
 
Baloney said:
3. Tax on rental income - this is due in October 31st of the following year. You fill out a FORM 12 (or form 11 depending on who you ask) to declare it. You calculate rental income minus interest paid on mortgage, minus any expenses eg insurance, utilities, maintenance, repairs. You can also deduct 1/8th of your captial allowances (fixtures and fittings).
You pay 42% tax on the total profit, plus 2% health levy. From 2006 onwards I think you have to be registered with the PRTB in order to claim back the mortgage interest.

4. Check out that your insurance on your rental property is still valid now that you have the place rented out.

5. When you sell it, you pay Capital Gains Tax on the profit. this is pro rata based on the proportion of time you rented it out of the total time you owned it. You can deduct Stamp Duty (I think), and solictors fees (cost of selling) from the profit to reduce the tax bill.
Click to expand...

3. ... 42% or 20% tax on the profit.

4. You need Landlord's liability insurance.

5. Yes, Stamp Duty is allowable plus acquisition costs.
 
There is a twelve month period of grace after you vacate the property. If you sell during this time then there is no capital gain liability. If you do sell after this period remember to take the 1270 allowance into account when calculating the capital gain.
 
So it seems there is a quagmire of legalities and issues, and indeed ways to save money and ways to screw things up.

Thanks all for your responses.
And now one more question.

Can anyone reccommend tax consultant or an account that I can use to get me sorted out. (which is best accountant or tax consultant?)
I am based in Cork

How much should I expect to pay.

Thanks again

S
 
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