Did you know you that the spare room in your house could be earning you up to €14,000 per year tax-free?
Renting a room in your home in Ireland can provide a few potential tax benefits, mainly under the Rent-a-Room Scheme, which is designed to encourage homeowners to rent out spare rooms. Here MyHome breaks down the key benefits and details:
- Rent-a-Room Relief
Under the Rent-a-Room Scheme, you can earn up to a certain threshold of rental income tax-free, provided the room is rented out as a residential accommodation. As of the start of 2025, the tax-free limit is €14,000 per year. If your rental income is below this amount, you don't need to pay income tax on it.
- Amount Tax-Free: €14,000 per year (if you're renting a room or rooms in your main home).
- Income Above the Limit: If your rental income exceeds €14,000, you’ll need to pay tax on the amount over the threshold.
- How It Works
- The rental income must be earned from renting out a room or rooms in your main home.
- The accommodation must be used solely as residential accommodation, not for holiday lets or as a commercial rental.
- The scheme applies to both full-time and part-time renting, so even if you're renting the room just for part of the year, it still qualifies if the total income is within the limit.
- Exemption from Other Taxes
Rent-a-Room Relief provides an exemption from the usual income tax, PRSI (Pay Related Social Insurance), and USC (Universal Social Charge) on rental income, as long as the income is below the threshold.
- How to Apply for Rent-a-Room Relief
- You don't need to apply for Rent-a-Room Relief separately. If you are earning income from renting a room, you just need to declare it on your annual tax return (Form 11 or Form 12).
- If your rental income is €14,000 or less, you simply claim the exemption on the form and do not need to pay tax on it.
- What Happens if You Exceed €14,000?
If you earn more than the €14,000 limit, the excess income will be subject to standard income tax rates, and you may have to pay PRSI and USC as well. However, you can still avail of tax deductions for expenses incurred in renting the room (e.g., part of the mortgage interest, utilities, or repairs).
- What If You Rent Out Multiple Rooms?
If you rent out multiple rooms in your home, the combined income from all rented rooms must be considered. As long as the total rental income stays below €14,000, you can still benefit from the tax exemption.
Key Takeaways:
- Rent-a-Room Relief allows you to earn up to €14,000 per year tax-free.
- If your rental income exceeds this limit, you will need to pay tax on the excess.
- It only applies to residential accommodation in your main home.
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