Buying your first home is a momentous personal achievement, which goes beyond having a place you can call your own. Thanks to a unique tax-free benefit, your home can actually help you enhance your financial prosperity. A new car, travel, furniture, and more are all possible simply by renting out a room in your home and earning up to €14,00 tax free with the Rent-a-Room Relief scheme! This is a practical and lucrative scheme that can lessen the cost of running your new home and help you earn extra money.

In Ireland, the lack of rental properties available has led to a huge increase in rental prices. The Rent-a-Room Relief scheme is, therefore, designed to encourage those with spare rooms to rent them out, in the hope that this may be one part of the solution to the housing crisis. So, if you, like many other homeowners in Ireland, have a spare room you can rent out, you should really do it.

 

It's a no-brainer - Here's why:

1. Renting out a room under the Rent-a-Room Relief scheme allows you to earn extra annual income of up to €14,000 tax free.
2. The Rent-a-Room Relief scheme does not impact the principal residence tax exemption you are entitled to when you sell your home.
3. You are not required to register as a landlord with the Residential Tenancy Board (RTB), so there is no need for you to navigate complex tenancy rules and regulations.

 

Qualifying for the Rent-a-Room Relief

To qualify for the tax relief, your home must be in Ireland and you must occupy it as your sole residence. This means that it must be your home for the greater part of the year and it must be where people would normally expect to contact you.

Additionally, your total rental income (including payments made by your tenant for food, utilities, laundry or similar goods and services provided by you) cannot exceed €14,000 in a calendar year. And, your tenant must use the room on a long-term basis, i.e. stay for a period of more than 28 days in a row.

You will not qualify for the relief:

• If your gross income from the rent you receive exceeds €14,000 per year.
• If you claim the relief against income you have received for the use of a room in your home from your child or the child of your partner, your employer, or short-term guests (including those who book accommodation through online booking sites).

 

Applying for Rent-a-Room Relief

To claim Rent-a-Room relief you must record your rental income when making your annual tax return. If you are a PAYE taxpayer, you can complete your tax return form online using Revenue's myAccount service. If you are self-employed or a taxpayer with other sources of income, you can complete your return on Revenue Online Service (ROS).

Alternatively, you can complete a hard-copy annual tax return. In this case, you will record your rental income for Rent-a-Room Relief in the 'Exempt Income' section of your tax return form and return the completed form to your local tax office.

 

Useful Tips for Renting out a Room in your Home

Since the relationship between you and your Rent-a-Room tenant is not like a traditional tenancy relationship and you are not required to register with the RTB, it may be useful to set some house rules. The smartest approach would be to put your rules in writing and to agree them with your tenant before they move in.

You can agree on points such as how much rent is payable and what is included in the rent (e.g. electricity, gas, broadband, etc.); when the rent should be paid; the duration of the tenancy; the notice period for each party to end the tenancy; and rules regarding visitors and permissible noise levels.

Even though a formal agreement is not a requirement for the Rent-a-Room relief, concluding an agreement to this effect may be helpful in the event of a misunderstanding or dispute between you and the tenant.

 

The Rent-a-Room Relief scheme empowers you to maximise your home's potential for financial gain. So, if you, like many other first time buyers, are looking to fill empty spaces in your home, renting out a room is an obvious choice. By doing so, you become eligible to benefit from a scheme that offers simplicity and flexibility, with straightforward qualification criteria and an easy process for claiming your tax relief.