What exactly is Rent-a-Room Relief?
If you rent out a room in your home, the income you get from tenants may be tax-free if certain conditions are met. Rent-a-Room relief is only available to individuals; corporations and partnerships are not eligible.
There are exemption limitations on how much rental income you may earn to be tax-free. If the landlord’s rent exceeds the exemption limitations, he or she must pay tax on the rent revenue generated.
Rent-a-Room terms and conditions
To be eligible for Rent-a-Room tax relief, you must fulfil the following requirements:
Gross earnings
The gross amount of rental revenue (before costs) must be less than the exemption limit. In2020, the exemption maximum will be €14,000. If your rental income does not exceed the exemption level, you do not have to pay income tax, PRSI, or USC.
Period of continuous letting
Rent-a-Room tax reduction is no longer available if your renting property is rented for less than 28 days in a row as of January 2019. This rule is not without exceptions.
Exclusions
Rent-a-Room tax relief cannot be claimed if the room(s) are rented 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)
Types of residences that qualify
Is it your primary or secondary residence?
If you rent a room or rooms in your primary property, you may be eligible for this tax break. The amount of time you spend in a given house determines this. You can live in more than one place, but your primary residence is where you spend the most of your time and where your friends and correspondents anticipate to find you.
Importantly
If you rent out the entire property, you won’t be eligible for this tax break. This assistance is only available if you live in the same house as the renter who is paying your rent. A self-contained apartment, such as a garage or a basement flat, can be added to the property.
The unit must be connected to the main property structure. You cannot claim this remedy if it is not connected.
In your accounts, how Rent-a-Room tax reduction works
- The gains or losses on the relevant sums are regarded as nil for income tax purposes if the gross amounts received from rental income do not exceed the existing limit (€14,000 per year from 1 January 2019).
- Rental revenue includes not just rent, but also meals, washing, and other comparable products and services.
- For income tax, PRSI, and USC purposes, earnings are ignored, and losses cannot be offset against rental profits from other lettings.
- The relief has no impact on your eligibility for mortgage interest deductions or capital gains tax exemption on the sale of your home.
Talk to us today!
Do you have any concerns about renting out a room or rooms in your primary residence? Speak with a member of our Customer Services team about our Rental Income services.
Please contact us at +353 1 442 8230 or moh@tasconsulting.ie.
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