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Rent A Room Scheme
If you rent out a room in your principal private residence (i.e.your home) to private tenants, the rental income will be exempt from income tax, as long as the income does not exceed €10,000 per year - equivilent to €833.33 per month.
The Basics of the Scheme :
- Renting a room does not affect an individual's entitlement to mortgage interest relief or CGT exemption for a principal private residence.
- Where more than one person is entitled to benefit from the rent (e.g. a husband and wife) the limit is divided between the individuals.
- The tenant can still claim tax relief on the rent paid
- You cannot get tax relief on rent charged to a son or daughter for renting a room.
- You are not covered by landlord legislation, so you do not have to register with the PRTB.
- The tenants living in your home are not covered by a tenancy agreement. They are only really entitled to reasonable notice, if you decide to end their tenancy.
- It will make sense to have a writen agreement with your tenants outlining how long the rental period is, how much notice either you or they have to give to end the agreement, how often the rent is paid etc.
- While no tax is liable, you must include it in your annual tax return (a Form 12 form is available from revenue.ie)
- Warning: If the rental income exceeds €10,000 per year, you have to pay tax on the full amount of the renal income. In addition, there are stamp duty and Capital Gains Tax implications, in this senario, as you would be treated as a regular investor rather than an owner occupier.
How does the rent a room scheme effect getting a mortgage?
- Some lenders will increase the amount you can borrow if you are planning on renting a room. Obviously, they won't take room rental into account, if you buy a studio or one bedroom apartment.
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