Does taking in students on a seasonal basis qualify one for the tax break, or does it have to be a continuous rental? Also, are refurbishment and furnishing costs associated with such room rental tax deductible?
If you let a room (or rooms) in your sole or main residence – on either a continuous or a seasonal basis – as residential accommodation and the gross amount received (“relevant sums”), including monies for food, laundry or similar goods and services, does not exceed the limit for the year of assessment (currently €12,000 per annum), the profits or losses on the relevant sums are treated as nil for income tax purposes.
Thus, these profits are disregarded for income tax, PRSI and Universal Social Charge (USC). (USC replaced income and health levy from 1/1/2011).
Refurbishment and furnishing costs associated with such a room rental are not tax deductible and losses cannot be offset against rental profits from other lettings.
Total relevant sums are a gross figure, ie no account is taken of any expenses incurred in generating the relevant sums. The relief does not affect your entitlement to mortgage interest relief or capital gains tax exemption on the disposal of your residence.
Where more than one individual is entitled to the relevant sums, the limit is divided equally between them. I would also recommend that you check with your financial adviser and/or local tax office before proceeding.
Karol Jackson O’Shea is a chartered residential surveyor and a member of the Society of Chartered Surveyors Ireland (SCSI) residential agency surveying professional group