Talking Money: Downsizing your home, 3rd August 2015

Last week on Drivetime’s ‘Talking Money’ we discussed the idea of ‘downsizing’ your home and what it means, how to do it, and the things you might want to watch out for if you are considering downsizing.

As people age larger homes often become less of a requirement, equally, selling your primary home being capital gains free can be advantageous, so we looked at the angles and figured out what you should watch for.

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Property Tax is a good thing, but only one type of it.

We had an opinion piece in the Sunday Times this week in the ‘Money’ section, it was about property tax and the different types that the state have to choose from, property tax could be a very beneficial option for Ireland but only if it is implemented correctly and done on the correct basis, otherwise it just becomes straightforward ‘revenue raising’.

You can read the article by clicking on the image to the left, which is the .pdf version of the text below:

Everybody hates the idea of a property tax—except me. I believe it is the solution to much of what went wrong in Ireland and it could have prevented many of our present and future economic ills. The only caveat is that we must have a corresponding reduction in income taxes. Otherwise it would merely be another form of revenue raising by the government.

There are three options the state could choose from—a property tax, which includes …

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Tax liabilities on negative cashflows? The perils of renting out your home

There is an interesting situation that we are seeing much more of lately, where people in negative equity or negligible equity are deciding that because they cannot now move up the ladder (which was the point in their initial purchase – as a stepping stone to trading up), they will instead rent out their home and then rent a house in the area they actually want to live.

While this is a working solution to a person in negative equity seeking mobility it can result in a tax liability that many people are not aware of, this is how it occurs, the portion of mortgage payment that goes against the capital is actually taxable, and if it is paid to the bank it doesn’t mean you don’t have to pay tax on it.

The finance act in 2009 brought about a change whereby only 75% of mortgage interest can be offset against Case 5 rental income as an expense, and this further exacerbates the situation even for those who have interest only loans!

However, we’ll demonstrate the position a person …

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High tax, and 'super tax' will collapse the tax base

I have said that taxing certain sectors of society more will actually decrease, the most recent and public evidence of this was U2 moving elements of their business to the Netherlands. What we don’t see on the front of the paper are the myriad of people who silently seek to do the same as the tax regime is tightened.

We have stated before that 50% of the tax take is paid for by the top 6.5% of workers, which is why I believe that a new ‘super tax’ for people earning more than €100,000 (for instance – nothing has been announced at the time of writing this) is actually a mistake. Why? Because there will be a surprising number of people who used to earn €150,000 or whatever amount above this you want to take, who will instead change their wages to €99,000 and leave the rest as retained earnings, increased pension contributions, use as expenses etc. etc.

This doesn’t help to push money into the economy, it …

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High tax, and ‘super tax’ will collapse the tax base

I have said that taxing certain sectors of society more will actually decrease, the most recent and public evidence of this was U2 moving elements of their business to the Netherlands. What we don’t see on the front of the paper are the myriad of people who silently seek to do the same as the tax regime is tightened.

We have stated before that 50% of the tax take is paid for by the top 6.5% of workers, which is why I believe that a new ‘super tax’ for people earning more than €100,000 (for instance – nothing has been announced at the time of writing this) is actually a mistake. Why? Because there will be a surprising number of people who used to earn €150,000 or whatever amount above this you want to take, who will instead change their wages to €99,000 and leave the rest as retained earnings, increased pension contributions, use as expenses etc. etc.

This doesn’t help to push money into the economy, it …

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