What is Rent-a-Room Relief?
If you rent a room in your house, the income you receive from tenants may be exempt for tax if you meet certain criteria. Only individuals can claim this relief, companies and partnerships cannot avail of Rent-a-Room relief.
There are exemption limits on the amount of rental income you can receive to be exempt from tax. If the rent exceeds the exemption limits then the landlord must pay tax on the rent income earned.
If you need help understaning Rent-a-Room Relief, get in touch with our Client Services Team who are always happy to discuss our accounting services with you.
To qualify for Rent-a-Room tax relief, you must meet the following conditions:
The gross amount (before deducting expenses) of rental income must be below the exemption limit. The exemption limit in 2020 is €14,000. This means you do not pay Income Tax, PRSI or USC if your rental income does not reach the exemption limit.
From January 2019, Rent-a-Room tax relief does not apply if your letting property does not exceed 28 consecutive days. There are exceptions to this rule.
For example, if the letting is for respite care for incapacitated individuals, accommodation for full or part-time students, or four-day 'digs'. Consult with an accountant for more information on whether you qualify for Rent-a-room relief.
You cannot claim Rent-a-Room tax relief if the room(s) are being let to your child or civil partner, an employer or short-term guests (including those who book accommodation through online booking sites and short-term tourist accommodation).
There is no restriction where rent is paid by other family members, for example, nieces and nephews.
Qualifying residence types
Sole or main residence
You can claim this relief if you rent a room or rooms in your main residence. This is defined by the amount of time you spend in the particular residence. You can have more than one residence but your main residence is where you spend the greater part of the time and where friends and correspondents would expect to find you.
You cannot claim this relief if you let the whole property. This relief is conditional on you being a resident in the same property as your tenant, who is giving you rent. On the other hand, the property can have a self-contained unit, such as a garage, or basement flat. The unit needs to be attached to the main property building. If it is not attached, you cannot claim this relief.
Business use/guest accommodation
The room(s) must be used for residential, long-term purposes to qualify for Rent-a-Room relief. This relief doesn't apply to letting for business purposed.
Talk To Us
Do you have questions about letting a room or rooms in your main residence? Talk to our Client Services team who can talk you through our Rental Income services.
Call us on +353 1 905 9364 or email firstname.lastname@example.org.
How Rent-a-Room tax relief works in your accounts
- If the gross amounts you receive from rental income don’t exceed the current limit (€14,000 per annum from 1 January 2019), then the profits or losses on the relevant sums are treated as nil for income tax purposes.
- Rental income does not just include rent; it also includes food expenses, laundry or similar goods and services.
- Profits are disregarded for income tax, PRSI and USC purposes, and losses cannot be offset against rental profits from other lettings.
- The relief does not affect your entitlement to mortgage interest relief nor capital gains tax exemption on the disposal of your residence.
- Finally, if you claim relief, you must provide details of the relevant sums on your annual tax return, notwithstanding that the profits or losses from the letting(s) are disregarded for income tax purposes.
Other tax reliefs for property owners
1) Mortgage Interest Relief
You are entitled to claim Mortgage Interest Relief on your main residence at the same time as claiming Rent-a-Room Relief. Mortgage Interest Relief is tax relief on the interest you pay in a tax year on a qualifying mortgage loan.
2) Owner-occupier Relief
You can claim Owner-occupier Relief at the same time as claiming Rent-a-Room Relief. You can claim Owner-occupier Relief if you spent money purchasing, construction, converting or refurbing a qualifying property. Check out our post on Tax Relief on Home Improvements in Ireland.
Need help with rental income tax returns?
Learn more about tax relief schemes during our Startup Webinar. If you have questions or some additional queries regarding Rent-A-Room Tax Relief, let us know by calling us on (01) 905 9364 or by emailing us at email@example.com.
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.