So the kids have flown the nest, and as well as finding yourself with an abundance of well-deserved peace and quiet you’ve also got one or two rooms going spare.
So the kids have flown the nest, and as well as finding yourself with an abundance of well-deserved peace and quiet you’ve also got one or two rooms going spare. You’d like to rent them out and sort yourself out with a bit of extra cash, but don’t want the hassle of registering as a landlord or filing out any complicated additional returns at the end of the year.
Well, you’re in luck! Under Irish rental law, if you’re renting a room or a number of rooms in your own home, you’re entitled to something called “Rent-a-Room Relief”. This means that you’re exempt from paying tax on any rental income you earn, provided it falls beneath a certain amount per year. You won’t have to register as a landlord, and the agreement you enter into with any rentees will be less formal than it would be under landlord and tenant legislation. However, there’s a few vital things you should know about Rent Relief first, so don’t go rushing off to upload those photos to Daft just yet…
You need to fulfil certain conditions to qualify
To qualify for Rent-a-Room Relief, you need to be living in the property you’re renting rooms in – if it’s not your sole residence, it should at least be your primary residence (a general rule of thumb is that it should be the place friends and family would expect to find you for most of the year).
Another very important stipulation is that you don’t qualify for rent relief if you earn over €12,000 from the endeavour per year (Update Budget 2017: The ceiling for exemption from income tax under the Rent-a-Room scheme is being increased from €12,000 to €14,000 for 2017 and subsequent years). Bear that in mind when you’re setting your rent – this amount includes any additional charges you might be asking for from tenants, e.g. food or ancillary services like gas, water and electric.
We take the hassle out of filing your Irish tax return
You are exempt from certain rights and obligations...
If you qualify for Rent-a-Room relief, you don’t have to register as a landlord with the Private Residential Tenancies Board (PRTB) and are not bound to the rights and obligations that this entails. This makes renting out a room in your property a lot less bureaucratic and formal than it would be otherwise: You don’t have to provide your tenants with a rent book or register the tenancy, and if it doesn’t work out you can terminate the tenancy at your own discretion.
You also don’t have to legally maintain the property to the same set of minimum physical standards that you would if you were a registered landlord, but… well… for the sake of your tenants, give the place a lick of paint before they move in.
…But this can be a bad thing.
The downside to Rent-a-Room Relief is that if you have a disagreement with your tenants over anything, you won’t have the legal protection of any Landlord agency to fall back on, and any discrepancies will go straight to Small Claims Court.
For example, if the person you’re renting to causes damage to your property and you want to charge them some money for wear and tear, this becomes a lot more complicated because of the informal nature of your rental arrangement. This could get messy if you haven’t got all your facts straight, which is why this next point is extremely important…
Put things in writing!
Although it’s not legally required of you, keep a record of everything. When you move someone in, agree on the price of the rent, the date it will be due by every month, and the way in which it should be paid (standing order, cheque, etc). Write up a contract (or download a template – there’s tonnes of them available free online) and make sure both you and your tenant sign it. Keep a record of any deposits and the date your tenants moved in – even if the rentee is your great uncle Joe or a close family friend, you never know what could go wrong.
It’s in the best interests of both you and your tenants to keep things written down and stowed away for a rainy day.
You still need to fill out a return
While it’s not as long or arduous as the return you’d have to fill out as an official landlord where there are a number of expenses you need to detail, you still need to declare your intentions regarding rent relief on your annual return.
As long as you’re careful and make sure you don’t exceed the maximum annual income stipulated by the Revenue, renting out a room can be a great way to make a tidy sum of money. If you do happen to stray over this limit, you can speak to one of our tax experts for free!