If I rent out rooms to students from September to May under rent-a-room and get the maximum income of €14,000, including meals, can I then also rent out the same rooms when they are empty over the summer doing short lets on Airbnb or similar?
In other words, can I stay under rent-a-room and then pay tax on the summer income or will I find myself bumped out of rent-a-room tax-free status if I increase the letting period and go over the €14,000? I would leave the rooms empty over the summer if that were the case so I need to be clear about the options open to me.
Ms JB
People looking to avail of rent-a-room relief are generally interested in maximising the earnings potential of their home – either to defray the cost of their mortgage or just to generally increase their income. So it’s not surprising that many of the same people would also consider short-term lets of rooms in their homes under Airbnb-style arrangements.
It makes sense to be clear on what you can and cannot do, as suddenly finding yourself with a tax bill on what you though was tax free income would be a real downer.
Rent-a-room relief is one of the more valuable tax reliefs available to ordinary people, allowing them – as you say – to earn up to €14,000 a year tax free by renting out one or more rooms in their home. The relief is available regardless of any other income they may have.
Unsurprisingly, given the generous relief available, there are fairly tight controls on what you can and cannot do under the scheme. And one of the big contentious issues in the relief’s earlier days was precisely the concept of holiday lets, or Airbnb-style arrangements.
If you receive a cent more than the €14,000 tax free limit, all the money you receive will be subject to income tax as well as PRSI and the universal social charge
Revenue has always maintained that short-term holiday style lets did not come under the terms of rent-a-room relief and, to avoid any confusion or challenge, the government of the day formalised this interpretation in the 2018 Finance Act. So where does that leave you?
The good news is that Revenue sees these two income streams as being entirely separate and, therefore, as long as you stay within the rules, there is nothing to stop you availing of both as long as you keep clear records of what is what.
You can let out rooms during the summer under Airbnb-style arrangements with the money you receive being treated under general income tax rules. And you can also get your €14,000 annually under rent-a-room, as long as you abide by the rules governing both regimes.
And those rules, as I said, are pretty strict.
For rent-a-room, the critical one is the income limit. If you receive a cent more than the €14,000 tax free limit, all the money you receive will be subject to income tax as well as PRSI and the universal social charge. And when you’re totting the money received, bear it mind that it will include anything that you may charge for meals, laundry, energy charges and so on, so it is not just the room rate.
It also includes any expenses you might incur in maintenance of the room(s) or replacing fixtures and fittings.
[ Your Money: more articlesOpens in new window ]
That aside, the other key criteria is that the letting must be considered to be long term. So what does this mean? Initially, it was simply put down as “long term” but, from 2019 this was specified more clearly to mean a period of no fewer than 28 continuous days, or four weeks.
Even then there are exceptions. These are where the person renting the room is incapacitated and an Irish resident; where they are a full or part-time student, or where they rent the room as “digs” on a four-days-a-week basis for at least four weeks.
Essentially, it is designed to cover things such as providing accommodation to students, including foreign-language students or to people in need of respite care.
Where there are exemptions, there are also exclusions and, for rent-a-room, the key ones are that you cannot claim where the room is rented either to your child or to a partner or spouse. Renting to your employer is also specifically excluded as are, understandably, any short-term holiday lets.
There is nothing to say you are limited to renting out only one room, but the income total remains the same and the property must still be your main home or principal private residence, so you cannot simply move out to free up more rooms for rent, even for a short period.
Nor does it have to be a property that you own, so you can avail of rent-a-room relief even as a tenant yourself as long as it is your main residence, though clearly you would want to be sure that subletting space does not conflict with the terms of the contract you have signed with your landlord. Unlike most rental scenarios, you do not have to register the property with the Residential Tenancies Board to qualify for the relief.
Interestingly, the income limit on rent-a-room relief has not budged since 2017 when it was raised from €12,000 to €14,000. There has been no talk of any move on that in this year’s budget but it will be an area to keep an eye on.
To claim the relief, you will need to make an annual tax return – either Form 11 is you are self-assessed, or Form 12 if the bulk of your income comes from PAYE earnings.
The rules here are changing quite regularly, most particularly as the Government continues to try to come to terms with the housing crisis and homelessness
On the subject of relief, it is worth noting that your tenants can also claim the rent tax credit of up to €500 on rent they pay you as long as they are not related to you. Obviously this won’t apply for foreign-language students as they have no income against which to offset it but, in the case of other students, parents can claim the credit if they are paying the rent. Otherwise the student can claim it against their taxable income.
That then brings us to the short-term holiday lets – via Airbnb or otherwise.
The rules here are changing quite regularly, most particularly as the Government continues to try to come to terms with the housing crisis and homelessness. Property in rent pressure zones are most restricted. Don’t make the presumption that this really only means Dublin and the other main cities. The number of rent pressure zones has been increasing regularly since 2016 and now includes 54 local authorities and/or local electoral areas. Westport was added to the list only last month, so it is a list you need to keeps tabs on if your property is not already covered.
You will need to register with your local authority regardless of whether you are renting out rooms or the entire house. There is a special form, Form 15, that you can get from your local authority and which you must complete at the start of the year in which you intend to use your property for short-term letting. You’ll need to file a separate Form 17, also available from your local council, at the end of the year.
Other than that, home sharers – people such as you who are intending to let out rooms on a short-term basis while they still live in the home – are not particularly affected. There are additional rules that are expected to come into force this year that will require Airbnb-type hosts to apply for planning permission but, again, that does not seem to apply to home sharers such as you.
So, registration and accurate filing of taxes apart, there does not seem to be anything stopping you letting out the rooms on a short-term basis over the summer and then availing of rent-a-room relief for some or all of the rest of the year.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
