Taxes on renting Rooms in a house

[TheApprentie]

Hi

i'm new here and not too sure what section this should go in, so feel free to move into the relevant section moderators

I've a query regarding renting 4 rooms in my house, lets say my mortgage is 2000 a month and i get 500 of each tenant. So at the end of the year my mortgage figure is 24000 and i've recieved 24000 form my tenants, do i have to pay any TAX ???

Expansion on above....Lets say i get 600 off each tenant which means i have surplus of 4800 at the end of the year, what tax do i pay??

Thanks in advance

 

[ClubMan]

Re: Taxes on renting a Room

I've a query regarding renting 4 rooms in my house, lets say my mortgage is 2000 a month and i get 500 of each tenant. So at the end of the year my mortgage figure is 24000 and i've recieved 24000 form my tenants, do i have to pay any TAX ???

Perhaps. What you need to do is take the total rental income (€24K p.a.) and deduct any allowable expenses (including mortgage interest but excluding capital repayments) and that will give you the assessable income figure. Also - if this is your own home then there will be a clawback of stamp duty if you rent out within the first 5 years of ownership and there will most likely be CGT implications for any eventual resale. You really should get independent, profesisonal advice on the tax implications of heading down this road.

 

[asdfg]

See also [broken link removed] for what you can claim against rental income

 

[liteweight]

You have to pay tax on all of your rental income. The rent a room scheme allows one to receive approx 7.6k per annum tax free but if the rent goes over this amount, even by a small sum, then the money collected from rental is taxed in it's entirety.

 

[ClubMan]

You have to pay tax on all of your rental income. The rent a room scheme allows one to receive approx 7.6k per annum tax free but if the rent goes over this amount, even by a small sum, then the money collected from rental is taxed in it's entirety.

It's not necessarily taxed in its entirety - it's assessable for tax in its entirety. You can still deduct allowable expenses when working out your tax liability. As I said above you need to get independent, professional advice.

 

[liteweight]

It's not necessarily taxed in its entirety - it's assessable for tax in its entirety. You can still deduct allowable expenses when working out your tax liability. As I said above you need to get independent, professional advice.

True, it's assessable for tax.

 

[Luternau]

You can still deduct allowable expenses when working out your tax liability.

Even for a PPR? Not sure about this. How can you account for the personal allowance that you get for mortgage interest? Also, how do you allow for the benefit that you enjoy from the money borowed?
According to revenue rules all rental agreements must be at arms length to be able to benefit from off setting expenses. You cannot for instance rent to yourself and then claim interest relief on the money borrowed for the property.

 

[ClubMan]

Even for a PPR?

If the PPR rent a room scheme applies then this is irrelevant since the income is exempt from tax anyway. If the rent a room scheme does not apply (and even if the property is also your PPR - i.e. live in landlord with lodgers) then I presume that allowable expenses can be offset against rental income when calculating tax liabilities. But as I said the original poster needs to get independent, professional advice.

 

[liteweight]

Luternau, I think some expenses have to be allowable, e.g. cost of accountant, public liability insurance, repairs and furnishing in proportionate amounts? I think the poster does need professional advice. On the surface, it appears to me that the OP would be better off declaring this an investment property, although this would depend on clawbacks, cgt on future sale etc., but at least the total amount of interest on the loan might be tax deductible. I say might, because I'm not sure if this applies to an existing property.

 

[Luternau]

If the PPR rent a room scheme applies then this is irrelevant since the income is exempt from tax anyway. .

Not in this case-exemption to tax is up to approx 7k, if this is exceeded, tax is liable on all the rent, not just the balance.
What I am unsure about is the allowable expenses-most of which (wear and tear, maintenance, insurance etc,) would be incurred if no rent achieved. Professional advice needed on this one.
Gotta say that it must be some house to live in yourself and be able to rent 4 rooms and pull in 24k (for non sole use of the property) A poster on another thread was looking to sell a house that was in D4, valued at 2m and was just pulling 24k for full rental!

 

[ClubMan]

Not in this case-exemption to tax is up to approx 7k, if this is exceeded, tax is liable on all the rent, not just the balance.

I know that and did not say anything to contradict it.

What I am unsure about is the allowable expenses-most of which (wear and tear, maintenance, insurance etc,) would be incurred if no rent achieved.

Again I just said allowable expenses and didn't get into specifics - what is or is not allowable in any specific situation would need to be clarified most likely on the basis of professional advice.

 

[liteweight]

Whatever about the ins and outs of what the OP can claim as deductible, th entire rent is definitely assessable for tax purposes in this instance.

 

[Luternau]

I know that and did not say anything to contradict it.

Again I just said allowable expenses and didn't get into specifics - what is or is not allowable in any specific situation would need to be clarified most likely on the basis of professional advice.

Being a bit hard on me there Clubman. I was not contradicting you, just adding more detail. If I was the OP ,on reading your post I would think that the RAR relief would apply and that I could claim expenses against the profit. Some people will not take the profiessional advice that is recomended so its best to tell them up front that its not as clearcut as it sounds.
As far as allowable expenses are concerned I do not think there are any, well at least none of the usual ones for property rental-e.g., insurance, interest relief, maintenance, utilities etc, as rental agreements must be, or at least I strongly believe they should be, at arms length to avail of such. Otherwise we could all rent to ourselves and get a tax break on mortgage interest, utilities etc,