Tax Credits & Reliefs >> Rent-a-Room Scheme for Tax Free Income

This is a very good tax relief scheme for individuals who sublet part of their principal private residence for residential purposes while they continue to occupy the property at the same time. Typically this would involve renting out a bedroom and sharing facilities between all occupants of the property. No tax is payable on such income provided it does not exceed €7,620 per annum or €635 per month for years up to 2007. The exemption limit is increased to €10,000 for 2008 onwards. In addition it does not affect the capital gains tax or stamp duty exemptions for one’s principal private residence. 

Also, the owner can continue to claim the normal mortgage interest tax relief due on the property. This relief allows home owners to generate an income from their property to assist in paying the mortgage without having to pay tax thereon. It is proving to be very popular with categories such as First Time Buyers who would have spare accommodation in their newly acquired house or apartment.

For the tax year 2007 onwards the exemption is not available for children paying a rent to their parents for a room in the family home. 

·           The tax free income from renting out a room, combined with mortgage interest tax relief, meets 75% of the estimated annual mortgage repayments. In addition the income qualifying for this relief is also exempt from the Income Levy.