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Renting out a room in your home
Maximising your income is one thing you can do to help address difficulties in paying your mortgage. If you have a spare room in your home, you may be able to make some extra money by renting it out to a tenant.
If you rent out a room (or rooms) in your principal private residence to private tenants during the relevant tax year, 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' scheme. Where more than one individual is entitled to benefit from the rent (for example, you and your spouse or partner), the limit of €10,000 is divided between the individuals concerned. Tenants who rent out a room(s) 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.
If you choose to rent out a room(s) in your home, you are not covered by landlord/tenant legislation. This means that you are not obliged to register with the Private Residential Tenancies board (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 principal 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(s) in your home, therefore, it is strongly recommended that you and the tenant(s) 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?
Effect of rental income on social welfare payments
If you are getting a means-tested social assistance payment from the Department of Social Protection, any rental income you get will be assessed as means and may affect your payment. However, rental income will not be assessed as means if you are getting a State Pension (Non-Contributory) or Widow's, Widower's or Surviving Civil Partner’s (Non-Contributory) Pension and you would be living alone unless you rented out a room in your home.
The total (gross) rent you receive (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 Universal Social Charge or income tax. However, it must be included on your annual income tax return.
Rent a room relief will not affect your Mortgage Interest Reliefor your exemption from Capital Gains Tax. (CGT is a tax on the capital gain (profit) made on the disposal of an asset, for example, when you sell a house.
Exclusions from rent a room relief
You will not qualify for tax relief on the rental income 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.
- You are renting the room in your home to your son or daughter.
- You are an employee or office-holder in a company, and the company pays you to allow clients to use the room in your home on an occasional basis.
Rental income achieved from renting a room(s) in your home is exempt from tax up to a maximum limit of €10,000.
Complete a Tax Return Form (Form 12)(pdf) at the end of the tax year indicating that you have received income from the 'Rent a room' scheme. Form 12 is available from your local tax office. Send your completed annual tax return to your local tax office. The tax office can answer any queries you may have and will help if you have any difficulties completing your tax return.
You can read more about the 'Rent a room scheme' in the Revenue leaflet A guide to rental income (IT 70).
Tenants living in your home should download and complete Form Rent 1 (pdf) to claim tax relief on rent paid for private rented accommodation. Tenants should forward their completed claim forms for tax relief to their nearest tax office.