Rent-a-Room Relief

Rent-a-room relief allows homeowners to earn tax-exempt rental income from private tenants. By renting out a room in your house you can earn tax-free income as long as it doesn't exceed €14,000 in a tax year (limit was €12,000 in 2016 and 2015 and €10,000 in 2014 and previous years). This limit applies to the gross amount of income received before you deduct expenses.

A self-contained unit, such as a basement flat or a converted garage attached to your home can also qualify for this relief.

To qualify for rent-a room relief:

• Your home must be located in the state
• You must occupy it as your sole residence during the year of assessment (it's your home for the greater part of the year)
• You don't need to own the property – you could be a tenant and be subletting to someone else (you may need to check if your landlord allows subletting)

You will not qualify for the relief if:

• Your gross income from rent and related services is over €14,000
• You're renting the room in your home to your son or daughter (there's no restriction in the case of other family members)
• You're an employee or office-holder in a company and the company pays you to allow clients to use the room in your home on an occasional basis
• You rent the room to short-term guests

If you qualify for rent-a-room relief, the income you get from renting out the room is not liable to PRSI, the Universal Social Charge or income tax. However, it must be included on your annual income tax return.

When making an annual tax return, you should record your rental income for rent-a-room relief in the 'Exempt Income' section of your tax return form at the end of the tax year and return the completed form to your local tax office.

If you don't make an annual tax return and your income from rent and related services is under the exemption limit, you don't have to claim rent-a-room relief as it will apply automatically.

Why you might opt out of rent-a-room relief

You can't deduct expenses from your rental income while claiming rent-a-room relief. However, depending on the circumstances, it might be worth your while to opt out in a particular year so that you can offset expenses against rental income and avail of wear and tear allowances.

To opt out of the rent-a-room relief in a particular tax year, you must notify Revenue in writing, on or before the return filing date for that tax year. If you make an annual tax return, you can opt out by marking the relevant box in the 'Exempt Income' section of the return, otherwise you can write to your tax district to say you don't wish the relief to apply.

What lets qualify for relief?

The relief applies only to residential tenancies and not to short-term guest arrangements. So for example you'll be covered if you're renting a room to a student for the academic year or for a one-month course. But taking in guests for short breaks won't qualify (such as letting out a room on Airbnb for a week).

If you normally rent out the room for the academic year and you rent it out for short breaks during the summer as well, you must identify the income you get from the short rentals separately from the income that qualifies for rent-a-room relief when making your tax return to Revenue.