Rent a Room Relief and Income Tax

Q: I rent a room in my principal private residence for €9,000 a year and I understand this amount can be earned tax free. I also have another property that I rent as a holiday let. What impact will this have on my rent-a-room relief, if the total amount from both goes over €12,000 in the year.

3rd September 2015

A: The rent a room relief applies to sums arising to an individual in respect of the letting, for residential purposes, of a room or rooms in his/her principal private residence. You cannot have more than one principal private residence at a given time, therefore you can only claim the relief for the €9,000 you earned. This amount can continue to be earned tax free.

The profit you earn from the second property will be liable to income tax as it will be treated as an investment property. To calculate the taxable profit you will be allowed to deduct certain costs relating to the property, such as 75% of the mortgage interest on the property, repairs and maintenance, accountancy fees etc. The profit is then taxed, depending on your level of other sources of income the tax rate can be as much as 52%.

 

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