6 Facts about Rent-a-Room Relief in Ireland

So the kids have flown the nest, and as well as finding yourself with an abundance of well-deserved peace and quiet you’ve also got one or two rooms going spare.

Maybe you’re starting to think that it might be a good idea to rent them out and collect some extra cash!

The good news is that, under Irish rental law, if you’re renting a room or a number of rooms in your own home, you’re entitled to claim what’s known as “Rent-a-Room Relief”. Through this relief, you can earn up to €14,000 tax-free.

What’s more, you won’t have to register as a landlord, and the agreement you enter into with any renters will be less formal than it would be under landlord and tenant legislation.

In this guide, we are going to outline everything you need to know about Rent-a-Room Relief.

What is Rent-a-Room relief in Ireland?

As we mentioned above, you can earn up to €14,000 in tax-free rental income through this scheme. However, it’s important to keep in mind that if the rent exceeds this exemption limit, you will be required to pay tax on the income earned. Homeowners cannot deduct expenses from their rental income while claiming for Rent-a-Room Relief.

Who can claim Rent-a-Room Relief?

In order to qualify for this tax relief:

You must be living in the property in which the room is rented out and this must be your primary residence
The room cannot be rented to family members
Short-term leases (such as Airbnb, bed and breakfast, and guesthouse bookings) are not eligible for Rent-a-Room Relief.
A self-contained unit which is beside the house, but not directly attached to it, cannot qualify for relief
While tax-free income can be earned through this scheme, landlords are still required to file an annual income tax return
You must meet the minimum continuous letting period which is 28 consecutive days

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Benefits for landlords

You are not required to register with the Residential Tenancy Board (RTB) as a landlord in order to avail of this relief
The property does not have to meet a specific standard
Landlords are not required to provide a rent book
The period of occupation can be ended with a reasonable notice
In case the owner decides to sell the property, Rent-a-Room Relief will not affect Capital Gains Tax.

If you qualify for Rent-a-Room Relief, you don’t have to register as a landlord with the Private Residential Tenancies Board (PRTB) and are not bound to the rights and obligations that this entails.

This makes renting out a room in your property a lot less bureaucratic and formal. For instance, you don’t have to provide your tenants with a rent book or register the tenancy, and if it doesn’t work out you can terminate the tenancy at your own discretion.

Disadvantages of the Rent-a-Room Relief

The downside to Rent-a-Room Relief is that if you have a disagreement with your tenants, you won’t have the legal protection of any landlord agency to fall back on, and any discrepancies will go straight to Small Claims Court.

For example, if the person you’re renting to causes damage to your property and you want to charge them some money for wear and tear, this becomes a lot more complicated because of the informal nature of your rental arrangement. This could get messy if you haven’t got all your facts straight, which is why this next point is extremely important.

Agreement with your tenant

Although it’s not legally required of you, keep a record of everything (such as a record of deposits and the date your tenants moved in). It’s in the best interests of both you and your tenants to keep things written down and stowed away for a rainy day.

When you move someone in, agree on the price of the rent, the date it will be due by every month, and the way in which it should be paid (standing order, cheque, etc).
Write up a contract (or download a template – there are tonnes of them available free online) and make sure both you and your tenant sign it.

You still need to fill out a return

You must file a tax return for landlords (Form 11 or 12) and you should select the box that you’re claiming a Rent-a-Room Relief.

As long as you’re careful and make sure you don’t exceed the maximum annual income stipulated by the Revenue, renting out a room can be a great way to make a tidy sum of money. If you do happen to stray over this limit, you can speak to one of our tax experts for free!

If you are unsure how to deal with the tricky tax documentation our team will handle all of the boring paperwork, so you don’t have to! We will ensure you avail of every tax relief you’re entitled to and transfer your maximum refund straight to your bank account.

It’s that simple!

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