The Rent a Room Relief Scheme in Ireland is a way for homeowners to pay less tax and earn additional income by renting out a room in their homes or a self-contained unit.
This scheme allows homeowners to receive up to €14,000 per year tax-free, making it an attractive option for those looking to make the most of available space.
In this blog post, we’ll explore the details of the scheme, eligibility requirements, how to apply, and what expenses are covered, to help you navigate the process with ease.
What is Rent-a-Room Tax Relief?
The Rent-a-Room Tax Relief Scheme allows homeowners to earn up to €14,000 per year by renting out a room or a self-contained unit in their home. This rental income is exempt from tax, provided certain conditions are met.
- Eligible properties – Your home must be located in Ireland and be your main residence.
- Eligible rental income – The total rental income cannot exceed €14,000 per year, including payments for utilities or similar services.
- Eligible tenants – The rental must be for long-term use (over 28 days), and the tenant must not be a family member or employer.
- Property Ownership – You do not have to own the property. You can also rent a room in a property you’re leasing, but you should check with your landlord about subletting.
What Does the Scheme NOT Cover?
Rent-a-Room Relief applies to the rental of rooms or self-contained units like a basement flat or converted garage, but there are a few exclusions:
- Income Exceeding €14,000 – If your rental income exceeds €14,000, you won’t qualify for tax exemption.
- Short-Term Lettings (Airbnb) – Renting to short-term tenants for stays of less than 28 consecutive days does not qualify.
- Family Members – You cannot rent to your spouse, civil partner, or children and claim the relief.
- Commercial Use – The rented space cannot be used for commercial purposes (like a bed-and-breakfast).
How to Apply for Rent-a-Room Relief
To apply for Rent-a-Room Relief, you must declare your exempt rental income on your annual tax return:
- PAYE Taxpayer – You can file your return using Revenue’s myAccount service (Form 12)
- Self-Employed – You can use the Revenue Online Service (ROS) (Form 11).
- Deadlines – There’s a four-year time limit to claim relief, so ensure you apply for the relevant tax year before the deadline. That means claims for 2021 must be made by 31 December 2025.
How Rent-a-Room Relief Affects Your Taxes
- No PRSI or USC – Rental income up to €14,000 is exempt from PRSI, Universal Social Charge (USC), and income tax.
- Capital Gains Tax – Renting a room does not affect your Capital Gains Tax (CGT) exemption if you sell your home.
- Impact on Social Welfare – If you receive social welfare benefits, the €14,000 limit applies without affecting your payments, but renting to family members or for short-term stays may affect certain benefits.
Immediate family members:
- Your spouse, civil partner or partner
- Your child, or the spouse of your child
- Your parent, step-parent or parent-in-law
- Your sibling, including step-siblings or siblings-in-law
- Your grandparent or your grandchild
- Your aunt or uncle
- Your nephew or niece
How to Opt-Out of Rent-a-Room Relief
If you wish to opt-out of the Rent-a-Room Relief scheme for a specific year, you can notify Revenue through:
- MyEnquiries on MyAccount – This is the easiest way to notify Revenue if you no longer wish to claim the relief.
- Postal Submission – You can also write to your local tax office.
What If I Rent a Room to Refugees?
The Accommodation Recognition Payment (ARP) scheme provides a tax-free payment of €800 per month for hosting refugees from Ukraine. This payment is exempt from income tax, USC, and PRSI, and it does not count toward your €14,000 rental income limit under Rent-a-Room Relief.
Benefits of the Rent-a-Room Relief Scheme
Tax-Free Income – No tax on rental income up to €14,000.
Extra Income – This extra income can help you pay your mortgage, holidays, or home renovations.
Easy Tax Process – You can report any income from the Rent-a-Room Scheme in your basic Form 12, which is easy to submit online.
Increased Property Value – Renting out a room may help increase the overall value of your home, especially if you create a self-contained living space or improve existing areas for the tenant. This can be a smart investment if you plan to sell your property later.
Flexible Rental Terms – You have the flexibility to choose the rental terms that work for you, whether it’s renting to a full-time tenant, a student, or someone on a short-term basis. This provides you with the option to manage your rental income in line with your personal needs.
Access to Additional Social Welfare Benefits – Renting out a room under this scheme still allows you to qualify for certain social welfare benefits without losing out on them.
FAQs
- Can I rent out a room to a friend and qualify for Rent-a-Room Relief?
Yes, as long as the rental income does not exceed €14,000 per year, and the rental agreement meets all other conditions.
2. What happens if my rental income exceeds €14,000?
If your income exceeds the €14,000 limit, the entire rental income becomes taxable, and you must report it on your tax return.
3. Can I rent a room through Airbnb and still qualify for Rent-a-Room Relief?
No, Airbnb rentals are considered short-term lets, which do not qualify for Rent-a-Room Relief unless the tenancy exceeds 28 consecutive days.
4. Is Rent-a-Room Relief available to landlords who own multiple properties?
No, Rent-a-Room Relief is only available to individuals who rent out a room in their primary residence.
5. Can I apply for Rent-a-Room Relief if I’m renting a self-contained unit in my home?
Yes, if the unit is within your primary residence, such as a basement flat or converted garage, you can qualify for Rent-a-Room Relief.
6. Does rent-a-room have to be registered with the RTB?
No.
SOURCES
- Citizens Information – Rent a Room Tax Relief Scheme
- Irish Tax Rebates – Rent a Room relief
- Revenue – Rent-a-Room Relief
