Friday 17 November 2017

Are there any tax pitfalls if I buy a home with friend?

siryan@independent.ie

After renting together for two years my friend and I want to buy a house. Neither of us would get enough of a mortgage separately. Are there any pitfalls tax-wise?

Buying as two separate people is not inherently different from buying as a married couple/civil partners.

The new increased mortgage interest relief for first time buyers -- up to 25pc per person (max €10,000pa) until 2017, makes 2012 a good time to buy.

Aundrea McDonnell of www.taxback.com adds: "Both of you are entitled to mortgage interest relief as single people based on the portion of the mortgage that relates to each of you.

"If you live in the property as your sole residence you can claim principal private residence relief when you sell and not face a liability to capital gains tax. If however, you let the property and sell it in the future, capital gains tax implications may arise.

"Any gain made on the sale of the property will be based on your percentage ownership. There are tax considerations in respect to rental income also.

"Taking the above into consideration, there are no tax pitfalls in purchasing a property with a friend."

My fiancée and I have a considerable amount of money on deposit from a house sale last year -- we are currently renting until the "right" property comes around, and at the right price. She is worried that if the euro goes, so will our money. Should we put it in a British bank account or convert it into something else while we wait?

Everyone's running a little scared these days. An estimated €700m was taken out of Greek banks in one week recently as nervous savers found safer havens, but where? Sterling and US dollars traded strongly, but all currencies would be badly affected by a euro collapse. Even gold has dropped in value.

To be honest, I would find it very hard to advocate panic measures. If everyone did what you suggest, that would be a bank run -- absolutely disastrous to the economy.

Brendan Costello of TalkFinancial.ie says whatever you do with your money there are risks.

"With sterling, you take on exchange, currency and UK economy risks. If you hold euro and the currency collapses, there will be global implications. Holding non-euro currency, though of benefit, will not hedge entirely against that risk.

"It is more likely than not that the euro will exist in 2013 and that any collapse would be a structured one.

"You have the benefit of easy cash access for closing a property deal fast. If the euro goes, it will be replaced by a new currency. Bank deposit funds, secured by the Irish state deposit scheme, would be converted to the new currency.

"During the process the value of your deposit would most likely be State-secured even if you experience restricted access during a short period of transition.

"On balance, if you are committed to purchasing in 2013, holding onto euro is the more reasonable proposition."

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