If you have a spare room you want to rent out in your home, we have great news; the income you earn is more than likely tax free. This is thanks to the rent-a-room relief scheme. And while it might seem contradictory, even though your rental income will be free of tax under the rent-a-room relief scheme, you still need to declare it to Revenue. In this blog post we are going to guide you through how to do that. 

Tax Free Rent & The Rent-A-Room Relief Scheme

The Rent-A-Room Relief Scheme was introduced in Ireland back in 2001. It was designed to encourage people with a spare room to rent it out and therefore help ease the housing crisis. It also means that if you rent out a room and earn under €14,000 a year in rental income, the money you earn is tax free!

You are eligible for the rent-a-room relief scheme if you are renting out a room for a minimum of 28 days consecutively in the property you live in as your primary residence (or a self contained unit attached to your property).

Most of our hosts are therefore eligible for this scheme and enjoy tax free rental income annually. 
In order to verify if you qualify for the scheme you can review the full criteria required in this blog post here. 

Who Has To Declare It?

Rest assured that the rental income you earn will be exempt from income tax, provided this income does not exceed the limit of 14,000 euros in a tax year.
Once you do qualify for the rent-a-room relief scheme, the next question that is usually asked is “do I need to declare this as income, if it’s tax free?”. 

The short answer is yes. Everyone must declare the income earned from renting, even if it is under the 14k annual tax free allowance that the rent-a-room relief scheme states. 
This is simply because it is income you earn, and any income earned must be declared.

But it’s very easy to do, and that’s exactly what we are going to walk you through now.

How To Declare Your Rental Income

If you earn less than €5000 annually in rental income you can simply declare it online using Revenue’s MyAccount service on the Revenue website.

This is a very simple process (as outlined by revenue.ie:)

1. Sign in to myAccount
2. Click on ‘Review your tax’ link in 'PAYE Services' request 'Statement of Liability'
3. Then click on 'Complete Income Tax Return'
4. Go to the ‘Non-PAYE income’ page, select ‘Other income’ and add ‘Rental Income’ complete and submit the form.

If you are earning over €5000 a year in rental income, you will need to follow a different, but equally simple process. You will need to fill in a Form11 for self assessment by signing into Revenue Online Services ROS Online. 

Revenue.ie have many helpful resources available to walk you through filing your Form11 here.

Whichever method you use to declare the rental income, both are straightforward and free to use and still mean that you won’t pay tax on the rental income you earn, provided you meet the criteria mentioned earlier for the rent-a-room relief scheme. 

If you do not wish to make this return online, you also have the option to file a hard copy of your annual rental income in person at your local Tax Office.

The annual deadline for filing your return is October 31st, or November 15th for online filing. 

In Summary

Declaring your rental income is a minor and simple task to undertake when you consider what you are gaining. You will be able to earn up to €14000 tax free rental income yearly from your spare room. Once you set yourself up with an online or paper return the first year, it will be very easy to do once a year after that. 

In the meantime every week that you earn a rental income from your room in line with the criteria for the rent-a-room relief scheme, you can rest assured that you won’t need to put any of it aside to pay tax, you can choose to spend it as you wish! 

The rent-a-room relief scheme is a fantastic way for you to earn €14,000 per year from renting out your spare room. And while it may seem counterintuitive that you have to declare something that is tax free, it is very simple to submit your earnings annually to Revenue, and doing so will still mean you pay zero tax on your rental earnings. 

When you rent out your room with Hosting Power, you are guaranteed to get guests staying for at least 28 days, meaning that your guests will fit the criteria required to qualify you for the Rent-a-Room Relief Scheme.

If you’d like to start earning tax free income by becoming a Hosting Power Host, you can apply today and have your first guest booking in no time.