If you rent out a room (or rooms) in your home to private tenants, the rental income you earn will be exempt from income tax, provided this income does not exceed a certain limit in a tax year. This is called the rent-a-room relief. A self-contained unit, such as a basement flat or a converted garage attached to your home, can qualify for this relief.
Depending on their circumstances, your tenant(s) may be entitled to claim Rent Supplement. You will have to fill out part of the tenant’s application form and provide your PPS number. In an area where the Housing Assistance Payment (HAP) is in operation, your tenant may qualify for this payment instead – read more in ‘Housing Assistance Payment’ below.
Your tenant(s) may be entitled to claim tax relief on rent paid – see details in our document on Tax issues for tenants.
The ceiling for exemption from income tax under the Rent-a-Room scheme is being increased from €12,000 to €14,000 for 2017 and subsequent years.
If you rent out a self-contained unit in your home, such as a converted garage attached to your home or a basement flat, the rights and obligations under residential tenancies legislation apply to you. For example, you are obliged to register the tenancy with the Residential Tenancies Board (RTB), provide a rent book to the tenant and ensure that the accommodation provided meets minimum physical standards.
The residential tenancies legislation provides for security of tenure for tenants. These provisions are in Part 4 of the Residential Tenancies Act 2004. However, if the self-contained flat or apartment was originally part of the main house, you can choose to opt out of these provisions. This option is available under Section 25 of the Act. You must give the tenant notice in writing, before the start of the tenancy, if you wish to take this option.
If the part of your home that you rent out is not self-contained, you are not covered by landlord and tenant legislation, so the rights and obligations under that legislation do not apply to you. For example, you are not obliged to register as a landlord with the RTB, 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 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 to the Small Claims Court.
Common claims that are heard by the Small Claims Court include disputes about retention of a tenant's deposit for what they consider unfair reasons, or deductions from rent for damage to property that is over and above normal 'wear and tear'.
Your tenants can find out more about their rights in our document Sharing accommodation with your landlord and can also contact Threshold for advice– see 'Where to apply' below.
Agreement with your tenant
Before you arrange to rent out a room in your home, it is strongly recommended that you and the tenant agree some ground rules and put them in writing. If you and your tenant each sign and keep a copy of this agreement, you can both refer to its terms in the event of confusion or disagreement. These ground rules might include:
Your home must be located in the State and you must occupy it as your sole residence during the year of assessment. This means that it is your home for the greater part of the year and is where people would normally expect to make contact with you. You do not have to own the property – you could be a tenant and be sub-letting to someone else. (In such cases, you would have to check with your own landlord that sub-letting is allowed – see our document on tenants’ rights and obligations.)
The relief applies only to residential tenancies, not to short-term guest arrangements. The occupants must be using the room on a long-term basis. For example, renting a room to a student for the academic year is covered, but taking in guests for short breaks is not.
From the tax year 2015 onward, the total (gross) rent that you get, which includes sums that the tenant pays for food, utilities, laundry or similar goods and services, cannot exceed €12,000 in the tax year (1 January to 31 December) – see ‘Exclusions from rent-a-room relief’ below .
You cannot deduct expenses from your rental income while claiming rent-a-room relief. However, depending on the circumstances, it may be worth your while to opt out of the relief in a particular year in order to offset expenses against the rental income and avail of wear and tear allowances – see 'How to apply' below.
If you qualify for rent-a-room relief, the income you get from renting out the room is not liable to PRSI, the Universal Social Charge or income tax. However, it must be included on your annual income tax return.
Exclusions from rent-a-room relief
You will not qualify for the relief if:
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:
If your tenant is applying for the Housing Assistance Payment (HAP), you will need to provide certain information to the local authority, which administers the HAP and will pay you directly. This information includes:
The local authority will inspect the property within 8 months of the first HAP payment, to ensure that it meets the minimum physical standards for rental accommodation.
You have up to 5 months to produce a tax clearance certificate to the local authority.
Rental income from renting a room in your home (and related services) is exempt from tax, up to a maximum limit of €12,000 (or €10,000 in 2014 and previous years). Where more than one person is entitled to benefit from the rent (for example, you and your spouse), this limit is divided between the individuals concerned.
If you make an annual tax return, you should record your rental income for rent-a-room relief in the ‘Exempt income’ section of your tax return form at the end of the tax year and return the completed form to your local tax office. The tax office can answer any queries you may have and will help if you have any difficulties completing the form.
If you do not make an annual tax return and your income from rent and related services is under the exemption limit, you do not have to claim rent-a-room relief as it will apply automatically.
If you wish to opt out of the rent-a-room relief in a particular tax year, you must notify Revenue in writing, on or before the return filing date for that tax year. If you make an annual tax return, you opt out by marking the relevant box in the ‘Exempt Income’ section of the return – otherwise write to your tax district to say that you do not wish the relief to apply for that year. Read more in Revenue's detailed note (pdf).
Use Revenue’s contact locator to find your tax office.
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000. The Phone Service will operate Monday to Friday, 9am to 6pm during January 2017. You can also visit your local Citizens Information Centre.