KNOW YOUR RIGHTS

TAX ON RENTAL INCOME

Question :I have retired from work and am planning to rent my spare room to a student lodger to supplement my pension. Will I have to pay tax on the rental income?

Answer: If you rent out part of your home as residential accommodation, the income you earn is exempt from tax, provided the total paid by the tenant(s) is not more than €12,000 in a tax year and you satisfy the qualifying conditions. This is called rent-a-room relief. It applies to accommodation in your home -- which can include a self-contained unit such as a basement flat or a converted garage. It does not apply to rooms that are not attached to your home and it does not apply to rent paid by your child.

You must live in your home as your sole or main residence during the tax year for which you are claiming the relief and the room(s) must be used as residential accommodation. For example, you can claim the relief if you are renting a room to a student for the academic year, but not if you are taking in short-term guests.

If you rent a room in your home, residential tenancies legislation does not apply. So, if you are only renting out a room, you do not have to register as a landlord with the Residential Tenancies Board (RTB), provide a rent book to the tenant or ensure that the accommodation meets any minimum physical standards. However, if you rent out a self-contained unit such as a basement flat, the legislation does apply.

The gross income you get cannot be more than €12,000 in a tax year. This includes sums that the tenant pays to you for food, utilities, laundry or similar goods and services. When you are working out whether the gross income is more than this limit, you cannot deduct any costs that you incurred in earning that income. If your income from rent and other services is over the limit, the entire income (not just the amount over the limit) is taxable.

If you qualify for rent-a-room relief, the income is not liable to PRSI, the Universal Social Charge or income tax. Claiming rent-aroom relief does not affect your mortgage interest relief or your exemption from Capital Gains Tax (CGT) if you sell your home. You do not have to claim rent-a-room relief as it applies automatically. However, if you are submitting an annual tax return you must record the amount of the exempt income on the return.

Further information is available from the Citizens Information Centre below.

Killarney - 0761 07 7820 Email: killarney@citinfo.ie

Tralee - 0761 07 7860 Email: tralee@citinfo.ie e

Caherciveen - 0761 07 7780 Email: caherciveen@citinfo.ie

Kenmare - 0761 07 7810 Email: kenmare@citinfo.ie

Killorglin - 0761 07 7830 Email: killorglin@citinfo.ie Listowel - 0761 07 7840 Email: .listowel@citinfo.ie Phone Centre No: 0761 07 4000