Will I Pay Tax When I Rent Out My Room In Ireland?
Sebastien Lopes,
December 18, 2020
December 18, 2020
So your spare room is ready, your guest is about to check-in and the extra money will be coming in too.
But you're wondering, will you need to pay tax on the rental income you are generating?
The very good news is that the answer should be no; thanks to the Rent A Room Relief Scheme!
If you want to know about this scheme and how you can qualify, read on.
History of the Rent a Room Relief Scheme
Let's look back for a moment.
The rent a room relief scheme has been effective since April 2001. It was introduced to find a solution to ease the housing pressure as the rental market in all major cities across Ireland was already facing major struggles.
The idea was simple: by encouraging people to let their spare rooms tax free, a lot of new rooms would become available on the rental market.
But that's not the only benefit of the scheme. It also helps homeowners who need additional income to help pay their mortgage (although it is also widely used by hosts who don't own their property). Furthermore, that accommodation tends to be of higher quality making it a better deal for the renter too.
This scheme has proven very successful and so has been annually renewed since. The relief amount has nearly doubled over time, starting at a maximum of €7,620 in 2001 and currently standing at €14,000.
How to qualify for the scheme
It's pretty straightforward, to qualify you just need to rent one or more rooms out in your home; and this home must be your main residence.
This isn't exclusive to homeowners either. You also qualify if you are renting the property.
A self-contained unit will qualify you for the scheme too, but only if it is attached to your house, like a basement flat or a converted garage for example.
Who can't avail of the scheme?
First of all, Revenue makes clear that you cannot claim this relief if you are letting your room to your child, civil partner or an employer. Nothing too surprising there.
But what you really need to be careful with is the following:
The Duration
Short-term guests are excluded from this scheme. Short term let is defined by Revenue as any continuous letting period which does not exceed 28 consecutive days.
The Exemption Limit
You also have to make sure that it does not exceed the exemption limit; which is €14,000 per year.
If your gross rental income does exceed the exemption limit, then the whole amount is subject to tax.
Rent Relief with Hosting Power
If you're considering hosting with Hosting Power, leave your worries at the door. We ensure that all our guests qualify for the rent a room relief scheme. Whether students or working professionals, they book stays for a minimum of 28 days.
You will just need to monitor your rental income to make sure that you stay under the yearly exemption limit income of €14,000.
For more information on how to become a host, please click here.
In Summary
If you rent out a room in Ireland you can qualify under the rent a room relief scheme, meaning you won't need to pay any tax on the rent income you earn.
This scheme applies to the rent you earn from a spare room within your primary residence.
You won't be taxed on the income you earn as long as you're renting it out to a tenant for a long term (28 consecutive days or more) and as long as your earnings don't exceed €14k in the calendar year.
If you choose to become a Hosting Power host, your rental income will fall under this scheme, meaning it will be tax free.
Are you ready to become a Hosting Power Host?