If you earn income from renting out a room (or rooms) in your home, you can receive this tax free, up to an annual limit of €14,000. This is called the Rent a Room Scheme.
The Scheme exempts the income from Income Tax, PRSI and USC and is subject to terms and conditions.
Principal Private Residence
The relief only applies if you are renting a room or rooms in your ‘principal private residence’, i.e. your home. To qualify, the residence must be situated in the Republic of Ireland.
If you own and live in more than one home, you can only have one principal private residence. In such cases, the relief will only apply to the home where you live for most of the tax year. Therefore it will rarely apply to the letting of holiday homes etc.
The relief can not be claimed on income for room rental income from
- Close relatives
- Your employer
- Lettings shorter than 28 days
- Short-term leisure accommodation, eg B&B, Airbnb etc
- Accommodation for business use.
The relief can be claimed on income for the following:
- respite care lettings for incapacitated individuals
- full or part time student accommodation, including language students,
- four-day-a-week ‘digs’.
The €14,000 limit
The relief only applies if the total rent received by the homeowner from residents in their home amounts to €14,000 or less in any given tax year.
If the rent exceeds this figure, even by a small amount, the relief is not available and the full amount taxed normally.
For this purpose, ‘rent’ includes the total of all sums receivable by the homeowner from the resident. This includes the rent itself and all other charges for heating, phone, food, laundry etc.
There is no deduction for expenses made in working out the rental income received – in all cases, the limit refers to the total rental income before all expenses, deductions and allowances.
Effect on other reliefs
The Rent a Room Scheme does not affect your entitlement to other tax reliefs relating to your home, such as Mortgage Interest Relief and Capital Gains Tax Exemption.