As colleges and universities start up again this September, many students will need accommodation, so there’s no better time to consider Revenue’s Rent-a-room relief, which means you can receive €14,000 in rental income tax-free, all through renting out your spare room.

What is Rent-A-Room Relief?

Rent-a-room relief entitles taxpayers to rent out a spare room in their home tax-free, provided the rental income does not exceed €14,000.

Who can get the tax relief?

The relief applies only to individuals, not companies or partnerships. However, in the case of two or more people receiving the income, for example, a husband or wife, the limit is divided equally between them.

What criteria must be met?

The room or rooms must be in a residential premise and must be the individuals sole or primary home during the tax year. An individual may live in more than one premises but can only avail of rent a room relief for their main home.

In general, an individual’s principal residence is their home for the greater part of a year. A good rule of thumb is that your principal residence is where your friends and family would expect to find you.

It is not possible to let an entire dwelling because the room or rooms that are let must form part of the residence that the individual seeking the relief resides. The room or rooms can comprise a self-contained unit within the home, for example, a basement flat or a garage conversion that is attached. However, a self-contained unit that is beside the house but not attached cannot qualify for the relief.

Can I get rent-a-room relief for guest accommodation?

The room or rooms must be used for residential accommodation, meaning the tenants are using the home on a long-term basis, as their dwelling.

Income from the short stay tenants, using online booking websites or other methods, does not qualify for relief as the visitors use the housing as guest accommodation rather than for residential purposes.

What income is considered?

The income considered in determining whether the relief applies the amount received in rent, as well as any amounts arising for meals, cleaning, laundry or other similar goods and services. No deduction is allowed for any expenses that have been incurred in connection with obtaining the income.

Example 1

Erin is looking to rent out her spare room. She currently owns two houses, one in Roscommon and one in Dublin, but spends most of her time in her Dublin home, which is where all her mail correspondence goes to, and friends and family expect to find her. After researching other room prices in her area, she decides to let out the room for €700 a month.

At €700 a month, she will be earning €8,400 a year, which is under the threshold, and as her Dublin home is her primary residence, Erin, therefore, is exempt from income tax for this rental income as she can avail of rent-a-room relief.

Example 2

Shane has recently renovated his house. As this was an expensive project, he decides to let out two of his spare rooms over the summer months to earn some money to cover his renovation costs. He will be letting out both rooms for €250 a week for 12 weeks.

As he will only be earning €3,000 in total, Shane is under the Rent-a-room relief threshold. However, he does not qualify for the relief due to the nature of the letting. As the tenants are only staying for a short-time and not for residential purposes, he can not avail of the relief so must include the €3,000 income in his income tax return.

Example 3

John’s daughter is going away to college in the UK. While she is away, John and his wife Ruth decide to rent out her room and another spare room to two students studying in Dublin.

They decide to rent out the room for €500 a month per person and offer meals for €100 a month and cleaning and laundry for €50 a month.

The rent per annum at €500 per person amounts to €12,000. However, the gross income assessed also includes the meals and laundry service, adding €3,600.

Since John and Ruth are both receiving this income, they have a joint threshold of €14,000, and as the total income earned is €15,600, they don’t qualify for the relief. They are liable to tax on the full €15,600 amount.

Do I still need to submit a tax return?

To qualify for the relief, you must file a tax return (Form 11 or Form 12) and tick the box that you are claiming rent-a-room relief. 

 

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client team below:

Staff Member

Position

Email

Telephone

Alan Murray

Tax Partner

amurray@mazars.ie

01 449 6480

Siobhán O’Moore

Tax Senior Manager

somoore@mazars.ie

01 449 6418

September 2019

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