Please advise if private homeowners can rent out a room in their home and avail of tax relief on the rental income. I am considering renting a room in my home to college students this year. Does the tax relief on rental income only apply to a 12 month lease or does it apply if I take in a student for their academic year also?
If a private homeowner decides to rent a room (or rooms) in their home to private tenants, the rental income earned may be exempt from income tax, PRSI and USC provided this income from rent and related services does not exceed €14,000 in a tax year. The relief applies only to residential tenancies, not to short-term guest arrangements. The occupants must be using the room on a long-term basis. For example, renting a room to a
student for the academic year is covered, but taking in guests for short breaks is not. Homeowners will NOT qualify for this tax relief if any of the following apply:
1. Income from rent and related services exceeds €14,000 in a tax year.
2. Renting a room to a son or daughter.
3. Renting a room to short-term guests.
Any such rental accommodation provided is essentially a room in a private home and is therefore not covered by landlord and tenant legislation. Tenants will therefore be staying under a Licensee Agreement, not a Tenancy Agreement. Any such Licensee Agreement should set out terms in writing to include such details as the rent payable and the manner in which it is payable i.e. by cash, cheque etc; the term of the tenancy; notice periods required should either party wish to end the arrangement; arrangements for payment of utility bills; rules regarding guests etc. This Agreement should be signed by both parties and a copy retained by each.