Rent a Room Scheme Clarification

R

RichTheRed

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


AFAIK you can't claim anything against rent a room income...
 
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.
 
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?
 
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,
 
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.
 
Thanks for the info. Looks like I need to get professional advice alright. I'll speak to my broker etc.
 
Sorry, He's an independent and a friend. He'll point me in the right direction at least.

Thanks
 
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,
Click to expand...

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.......
 
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;)
 
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.
 
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.
Click to expand...

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.
 
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:
Click to expand...


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 . "
 
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.
 
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.
 
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.
Click to expand...

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
 
Last edited:
You don't have to register with PRTB if you're renting a room in your house, no matter what you're charging.
 
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.
Click to expand...
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?
 
You must log in or register to reply here.
Back
Top