# Rent a Room Scheme Clarification



## RichTheRed (21 Feb 2007)

I don't know if this has already been discussed in length, however I'd like clarification. I am in the process of closing on a house. I will be looking to rent out two rooms in the house to cover mortgage payments etc. However these rents totalled will go over the rent a room allowance of 7620.
Can I claim expenses on the 'profit'? Or how is it defined as a profit/loss on rental. Can things like, maintenance fee, utilities, insurance etc be claimed?

Sorry, would just like to get it right before getting any tenants!


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## Newby (21 Feb 2007)

Where the rent is over €7,620 all of the income is taxable. The Rent a room scheme is simply not applicable.


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## jhegarty (21 Feb 2007)

RichTheRed said:


> I don't know if this has already been discussed in length, however I'd like clarification. I am in the process of closing on a house. I will be looking to rent out two rooms in the house to cover mortgage payments etc. However these rents totalled will go over the rent a room allowance of 7620.
> Can I claim expenses on the 'profit'? Or how is it defined as a profit/loss on rental. Can things like, maintenance fee, utilities, insurance etc be claimed?
> 
> Sorry, would just like to get it right before getting any tenants!




AFAIK you can't claim anything against rent a room income...


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## ClubMan (21 Feb 2007)

Once you breach the rent a room limit then you are assessable for income tax on the lot (not just the excess over the limit), you are basically a landlord, must register with the _PRTB_, and your property becomes an investment property which may mean has tax (e.g. stamp duty clawback and _CGT_) implications. If at all possible stay under the €7,620 limit unless you are prepared for all the implications of being a landlord as summarised below:

Property Investment FAQ

_Post crossed with previous ones._


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## RichTheRed (21 Feb 2007)

Thanks for that clarification. Ok, so if I am for example now considered an investor.
I am taking in 12,000 in rent for the two room in a year, and the mortgage interest for the first year is 16,000, plus insurance of another 500 or so, maint fee of 1200 etc. I take it I am making a loss on the rental income and therefore not liaible to pay anything. Or am I looking at this too simply?


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## HighFlier (21 Feb 2007)

If you are happy to settle that it is an investment property with all the issues raised by previous posters and if your interest is more than your income then you have no tax liability. Note well that only the interest portion of the mortgage is considered not the total mortgage payment,


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## ClubMan (21 Feb 2007)

You still have to file tax returns and only some expenses are allowable against rental income (e.g. mortgage interest but not capital repayments). You must register with the _PRTB_. Check the _FAQ _that I linked to and get independent, professional advice.

This thread might be of interest to you:

Interest only mortgage

The situation in which you are an owner occupier renting rooms outside the scope of the rent a room scheme could be complicated tax wise (e.g. you cannot offset interest against rental income AND claim owner occupier mortgage interest relief on the same interest; there may be some part _PPR SD/CGT _exemption allowed etc.). You really need professional advice.


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## RichTheRed (21 Feb 2007)

Thanks for the info. Looks like I need to get professional advice alright. I'll speak to my broker etc.


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## ClubMan (21 Feb 2007)

RichTheRed said:


> I'll speak to my broker etc.


What sort of "broker"? If not an authorised advisor, multi-agency intermediary, accountant or general tax advisor then you might not be getting independent, professional advice.


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## RichTheRed (21 Feb 2007)

Sorry, He's an independent and a friend. He'll point me in the right direction at least.

Thanks


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## monkeyboy (21 Feb 2007)

HighFlier said:


> If you are happy to settle that it is an investment property with all the issues raised by previous posters and if your interest is more than your income then you have no tax liability. Note well that only the interest portion of the mortgage is considered not the total mortgage payment,


 
If you start looking at it from the point of view as an investor losing money therfore no tax surely you have just landed your self into CGT and Stamp categories?? No??

IMHO In this situation you are way better off and far simpler to rent the 2 rooms for the max allowable and then charge the balance in bill contributions or kitty money etc.......


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## bacchus (21 Feb 2007)

That's a no brainer... stay below the €7620 threshold to qualify for rent-a-room, otherwise SD/PRTB reg/no mortgage relief/CGT will kick in at various stages.
Mind you, if you just bought, you may never have to worry about CGT


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## alfabeta (23 Feb 2007)

The leglisation would appear to not allow deduction for expenses, as follows...

"relevant sums" means all sums arising in respect of the use for the purposes of residential accommodation, of a room or rooms in a qualifying residence and includes sums arising in respect of meals, cleaning, laundry and other similar goods and services which are incidentally supplied in connection with that use; 

In ascertaining the amount of relevant sums for the purposes of this subsection no deduction shall be made in respect of expenses or any other matter.


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## Newby (23 Feb 2007)

alfabeta said:


> The leglisation would appear to not allow deduction for expenses, as follows...
> 
> "relevant sums" means all sums arising in respect of the use for the purposes of residential accommodation, of a room or rooms in a qualifying residence and includes sums arising in respect of meals, cleaning, laundry and other similar goods and services which are incidentally supplied in connection with that use;
> 
> In ascertaining the amount of relevant sums for the purposes of this subsection no deduction shall be made in respect of expenses or any other matter.



Just to clarify that definition is the calculation of sums for the rent a room scheme. The usual deductions are available where the property is an investment property and in that case the rent a room scheme would not apply.


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## pat127 (23 Feb 2007)

ClubMan said:


> Once you breach the rent a room limit then you are assessable for income tax on the lot (not just the excess over the limit), you are basically a landlord, must register with the _PRTB_, and your property becomes an investment property which may mean has tax (e.g. stamp duty clawback and _CGT_) implications. If at all possible stay under the €7,620 limit unless you are prepared for all the implications of being a landlord as summarised below:


 

Do you have a source for this please Clubman? My understanding is as follows and it was confirmed a few days ago by the PTRB when I was asking them about a related matter.



"If you choose to rent out a room(s) in your home, you are not covered by landlord/tenant legislation in Ireland. This means that you are not obliged to register with the PRTB as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum physical standards . "


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## alfabeta (23 Feb 2007)

Rental Income is subject to tax, however if you rent a room in your PPR whilst you still live there you can earn up to €7260 per year without being subject to tax.  This limit as previously stated is the maximum.  See [broken link removed].  You cannot claim the exemption under this rule if your income exceeds this limit.  The PRTB is correct in so far as you are choosing to rent a room under the revenue guidelines only.


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## Karangka (23 Feb 2007)

Starting from 2006, in order for interest charges to be deductible against rental income, landlords must be registered with PRTB. In the case of the OP, how would it be treated? OP can't register with PRTB, at the same time does not qualify under rent a room scheme. Furthermore as mentioned by Clubman, OP will have issue in relation to claiming interest on PPR.


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## pat127 (24 Feb 2007)

alfabeta said:


> Rental Income is subject to tax, however if you rent a room in your PPR whilst you still live there you can earn up to €7260 per year without being subject to tax. This limit as previously stated is the maximum. See [broken link removed]. You cannot claim the exemption under this rule if your income exceeds this limit. The PRTB is correct in so far as you are choosing to rent a room under the revenue guidelines only.


 
Thanks alfabeta. I'm still confused. I don't think it's clear if the OP is talking about his private residence or not. I had worked on the assumption that he was and that's what I'm interested in. 

Is it possible that the amount earned dictates whether or not the 'landlord' is under PRTB's jurisdiction, i.e under the €7,260 limit he isn't, but over it he is? I didn't think to ask PRTB this precise question.

Thanks


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## liteweight (24 Feb 2007)

You don't have to register with PRTB if you're renting a room in your house, no matter what you're charging.


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## ClubMan (25 Feb 2007)

liteweight said:


> You don't have to register with PRTB if you're renting a room in your house, no matter what you're charging.


Are you sure about that? Even if you are not availing of the rent a room scheme by virtue of receiving more than €7,620 p.a. in rental income?


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## liteweight (25 Feb 2007)

ClubMan said:


> Are you sure about that? Even if you are not availing of the rent a room scheme by virtue of receiving more than €7,620 p.a. in rental income?



I asked Revenue and PRTB. I know that's no guarantee but I was told that a tenant in one's PPR is viewed as a lodger. One is stll subject to income tax on entire annual amount if rent a room scheme threshold is exceeded.

Basically, a landlord can deduct interest on mortgage against rental income but someone who rents a room still claims TRS, but pays income tax on rental income.

I'm not sure what happens if property is sold. For example a landlord who sells pays CGT but if an owner/occupier sells, he/she does not, whether there is a lodger or not.  I'd like to find something on the revenue site which clarifies the whole thing, but so far, no joy.


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## Satanta (25 Feb 2007)

ClubMan said:


> Are you sure about that? Even if you are not availing of the rent a room scheme by virtue of receiving more than €7,620 p.a. in rental income?





> If you choose to rent out a room(s) in your home, you are not covered by landlord/tenant legislation in Ireland. This means that you are not obliged to register with the PRTB as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum physical standards .


 Citizens Information


Note: It doesn't mention RaRS in that little chunk of text, but it does above and below, so possible this only applies under RaRS???


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## ClubMan (25 Feb 2007)

Thanks for the info.


liteweight said:


> I'm not sure what happens if property is sold. For example a landlord who sells pays CGT but if an owner/occupier sells, he/she does not, whether there is a lodger or not.  I'd like to find something on the revenue site which clarifies the whole thing, but so far, no joy.


I presume (but don't know for sure!) that a live in landlord renting to lodgers outside the scope of the _RaRS _would get partial _PPR CGT _relief or something?


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## liteweight (25 Feb 2007)

Satanta said:


> Citizens Information
> 
> 
> Note: It doesn't mention RaRS in that little chunk of text, but it does above and below, so possible this only applies under RaRS???



Thanks for the link Satanta. It's another one of those grey areas really. I don't see how they could view an owner/occupier renting a room in the same way as they view the landlord of an investment property. Revenue couldn't  say on one hand, that a landlord can deduct the entire interest on his mortgage  while on the other hand, telling an owner occupier, whose rental income exceeds the rars threshold, that he/she cannot but are still subject to the same rules/guidelines as the aforementioned landlord. Or can they?


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## Satanta (25 Feb 2007)

liteweight said:


> Or can they?


I'd say it depends on which member of staff you talk to 

As you say, seems like a slightly grey area. There are certain situations where the rules aren't clear (e.g. the situation of RaRS and renting to a family member where Revenue appear to have changed the situation - originally not allowed, then allowed, then not allowed!) so not sure they could give a clear answer even if you did ask.


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## liteweight (25 Feb 2007)

ClubMan said:


> Thanks for the info.
> 
> I presume (but don't know for sure!) that a live in landlord renting to lodgers outside the scope of the _RaRS _would get partial _PPR CGT _relief or something?



I know that's the way they do it if you run a company from home. Many years ago our solicitor told us that if we ran a company from the house, never to pay the mortgage or any large bills from company accounts as we'd end up with a cgt bill when we came to sell!


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## ClubMan (25 Feb 2007)

Yeah - I guess that something similar might apply since renting to lodgers is basically running a business from the home. But if anybody needs to know for sure then they should get independent, professional advice.


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## liteweight (25 Feb 2007)

ClubMan said:


> Yeah - I guess that something similar might apply since renting to lodgers is basically running a business from the home. But if anybody needs to know for sure then they should get independent, professional advice.



I agree but as Satanta and people on other threads have stated, the Revenue rules are open to interpretation. So if you get an accountant who looks at it, smiles and says IMO there's not liability, then it's happy days. But if you get one who shakes his head, sighs and says IMO you're liable, where does that leave you?

There are hundreds if not thousands of people renting one or more rooms in their houses to students. These people used to be exempt but I don't know how they stand now!


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## ClubMan (25 Feb 2007)

liteweight said:


> There are hundreds if not thousands of people renting one or more rooms in their houses to students. These people used to be exempt but I don't know how they stand now!


Are you *sure *that they were ever exempt from income tax on such income?


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## liteweight (25 Feb 2007)

ClubMan said:


> Are you *sure *that they were ever exempt from income tax on such income?



I thought I was sure but now that you ask....A few women I know used to do it while their children were young. They told me it was tax exempt but I've no personal experience of it. Thinking about it though perhaps it was  that they didn't earn enough to be brought into the tax net?  So to answer you Clubman...no I'm not sure.


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