Total tax take on an investment property?

R

robert 200

Registered User
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I am trying to persuade a friend not to borrow and buy an investment property and let it out.

I remember a thread that stated that the real tax take on renting was around 70%.

Can anyone remember the breakdown of this 70% please?
 
Not trying to be smart or rude, but if your friend can't already tell you what the taxes and costs are down to the last euro he/she has no business going near an investment property.
 
Dub nerd ,

He has €80k burning a hole in his pocket and his options are very limited as we know and I would like to convince him with the 70% tax facts
 
I rent out a property. I get €1,620 a month / €19,440 a year. The interest cost is negligible, probably circa €750 a year. The service charge is circa €1,500 a year. I pay an agent circa €1,300 a year. I spend circa €300 a year on repairs etc. Mortgage protection is circa €240 a year. I claim capital allowances of €1,000 a year in respect of furniture, fixtures, and appliances. I pay property tax of circa €300 a year. My tax bill is circa €7,500 a year.

My after-tax return is therefore circa €7,500 a year which isn’t bad.

The ultra low interest cost (0.5%) is clearly transformational. At the prevailing rates, the position would be far less rosy. I would not buy a property funded at north of 4%.

You can see that the total tax take on my property is circa €7,800 which is fair enough I’d have thought.
 
robert 200 said:
Many thanks Sarenco ,but I thought there was a breakdown of the 70% on some thread???
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I presume the c. 70% figure comes from the (i) the fact he's most likely earning at the marginal rate so straight up going to pay 50%+ between Income Tax, PRSI & USC and (ii) the fact he can only offset 75% of mortgage interest against the rental income.
 


How much are your loan repayments?


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
How much are your loan repayments?


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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Circa €1,100 per month.

The capital repayments are clearly just a cashflow issue, on the basis that they represent a form of deferred savings.
 
Gordon Gekko said:
Circa €1,100 per month.

The capital repayments are clearly just a cashflow issue, on the basis that they represent a form of deferred savings.
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That's fine for you in that you are aware of that and have the disposable income to pay the additional costs each year.

The issue is that a lot of people don't realise that that an investment property with a mortgage is an actual cost and for a long time too. They want a property because we are obsessed with property in Ireland. They neither understand the risks of gearing or the costs involved.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 

(iii) Several other overhead costs are non-allowable for tax purposes. (iv) Capital allowances are non-allowable for USC purposes.
 
...and LPT is still a non-deductible expense...

It might be more accurate to say that the tax liability, expressed as a percentage of net rental profit, often exceeds 65% on a mortgaged rental property.

That's a pretty staggering tax burden.
 
Vanessa said:
Landlords are unpaid tax collectors used by Government to provide housing
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That is a very interesting perspective.

If more than 50% of the rent paid by the tenant goes to the government in tax. It is reasonable to view the whole thing as a tax collecting service with accommodation provided, rather than property rental business with a tax burden.
 
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