I am considering renting out two or three bedrooms in my house to students. I will continue to live in my home. Please advise me of the taxation implications. Can I rent a room in my house and receive tax-free rental income?
If you decide to rent a room (or rooms ) in your home to private tenants, the rental income you earn will be exempt from income tax, 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.
You will not qualify for this tax relief if any of the following apply: your income from rent and related services exceeds €14,000 in a tax year; you are renting the room in your home to your son or daughter; you are renting the room to short-term guests; you are 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.
Given that the rental accommodation you are providing is in fact a room in your home you are not covered by landlord and tenant legislation. Therefore, tenants living in your home are living under a Licensee Agreement, not a Tenancy Agreement.
Should you decide to rent out a room in your home, it would be advisable to set out terms in writing to everyone is clear from the outset what is expected.
Such an agreement should include such details as: the rent payable and the manner in which it is payable - 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. This agreement should be signed by both parties and a copy retained by each.
This column is prepared by Dolores Gacquin, solicitor. Byrne Carolan Cunningham have offices in Athlone, Moate, Lanesboro, and Galway. A person should always contact their solicitor to obtain legal advice specific to their own situation. The above column contains general advice and cannot be relied upon as legal advice.
Call Byrne Carolan Cunningham on (090 ) 6478433 for advice particular to your situation.