Q I took your advice and fixed my mortgage but I’m still struggling financially after the recent interest rate increases as I left it late to fix. I need to supplement my income and I heard about renting out a few rooms in my house tax free. Can you please tell me more?

A Sorry to hear that, but now that you are fixed you’ll at least avoid any expected future increases. Supplementing income by renting a room under the rent-a-room scheme can be a great way of getting an additional tax-free income, but you need to be aware of the small print.

Renting a room or rooms in your home to tenants while you are living there is a useful way to help pay the bills. And, as long as you meet certain criteria, it can be tax-free. But there are strict rules.

1. Know the limit on how much you can earn. That limit is €14,000pa and it is absolute. Go to €14,001, and not only will you be taxed on the extra €1, you’ll be taxed on the whole €14,001 that includes PAYE, PRSI and the USC.

2. If you are claiming under the rent-a-room scheme, you are obliged to notify the details to Revenue in an annual tax return even though the income is tax free.

3. Utilities, if charged over and above rent, are not the only things that have to be considered in calculating whether you meet the €14,000 tax-free threshold; the same is true if you are charging for food, laundry, cleaning or any similar household service.

4. The property needs to be your home, not an extra house that you have available to you. And the relief does not apply to short-term stays under providers like Airbnb, renting to family members or providing accommodation on behalf of your employer.

5. You are not allowed to offset expenses incurred in maintaining the property against your rental income, with only the net amount being assessed for tax.

There are other advantages for the homeowner. Apart from the tax-free income, you do not have to meet the requirements imposed on other landlords. That includes contentious issues such as notice periods.

Also, even if homeowners are on means-tested social welfare payments, they will still be able to access rent-a-room without adversely impacting that welfare payment. It is worth noting that you do not necessarily have to be the owner of the property to claim tax relief.

This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article

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