Rent A Room Tax
If you rent out a room (or rooms) in your home to private tenants, the rental income you earn will be exempt from income tax, provided this income does not exceed €10,000. This is called the rent a room relief.
Where more than one person is entitled to benefit from the rent (for example, you and your spouse), the limit of €10,000 is divided between the individuals concerned. Tenants who rent out a room in your home are entitled to claim tax relief on rent paid.
If you are renting a room in your home to your son or daughter you cannot get tax relief on the rental income.
Your rights and obligations as a landlord
If you choose to rent out a room in your home, you are not covered by landlord/tenant legislation in Ireland. This means that you are not obliged to register with the PRTB as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum physical standards.
This also means that private tenants living in your home are living under a licensee agreement not a tenancy agreement and are really only entitled to reasonable notice if you choose to terminate the agreement. Tenants are, however, entitled to refer disputes regarding periods of reasonable notice, retention of deposits, and disputes regarding deductions from rent for damage to property that is over and above normal wear and tear to the Small Claims Court.
Before you agree or choose to rent out a room in your home, it is strongly recommended that you and the tenant agree some ground-rules in advance. You should put these ground-rules in writing and both parties (that is, you and your tenant) should sign and each keep a copy of this agreement so you can both refer to the terms of your agreement in the event of confusion or disagreement. Some of the ground-rules you might consider are:
- What will the period of the tenancy be?
- What will be the minimum periods of notice if either party chooses to terminate the agreement?
- How much will the rent be and when can this be reviewed?
- How will rent be paid and is rent to be paid weekly/fortnightly/monthly?
- What is the situation regarding visitors and friends staying over?
- Are there any restrictions regarding noise levels?
To get rent a room relief:
The total (gross) rent you get from your tenant (or tenants), which includes sums the tenant pays for food, laundry or similar goods and services, cannot exceed €10,000. If you get rental income over and above this amount, you are not entitled to the relief
Your home must be in Ireland and must be occupied by you during the year of assessment as your principal private residence.
You cannot deduct expenses from your rental income to qualify for rent a room relief. If you qualify for rent a room relief, the income you get from renting a room in your home is not liable to PRSI, the health levy, the income levy or income tax. However, it must be included on your annual income tax return.
You will not get rent a room relief if your gross income from rent is over €10,000. In this case, your rental income minus allowable expenses will be treated by Revenue as part of your total income for tax purposes and should be included in your tax return.
Rent a Room Relief will not affect your mortgage interest relief or your exemption from Capital Gains Tax (CGT). (CGT is a tax on the capital gain (profit) made on the disposal of an assest, for example, when you sell a house).