If you rent out a room (or rooms) in your principal private residence to private tenants during the relevant tax year, the rental income you earn will be exempt from income tax, provided this income does not exceed €12,000 This is called the “Rent a room” scheme. Where more than one individual is entitled to benefit from the rent (i.e., you and your spouse, etc.), the limit of €12,000 is divided between the individuals concerned. Tenants who rent out a room(s) in your home are entitled to claim tax relief on rent paid.
If you are renting a room in your home to your son or daughter you cannot get tax relief on the 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.
This also means that private tenants living in your principal home are living under a “Licensee Agreement” not a tenancy agreement and are really only entitled to “reasonable notice” if you choose to terminate the agreement. Tenants are, however, entitled to refer disputes regarding periods of reasonable notice, retention of deposits, and disputes regarding deductions from rent for damage to property that is over and above normal “wear and tear” to the Small Claims Court.
Before you agree or choose to rent out a room(s) in your home therefore, it is strongly recommended that you and the tenant(s) agree some ground-rules in advance. You should put these ground-rules in writing and both parties (i.e., you and your tenant) should sign and each keep a copy of this agreement so you can both refer to the terms of your agreement in the event of confusion or disagreement. Some of the ground-rules you might consider are:
What will the period of the tenancy be?
What will be the minimum periods of notice if either party chooses to terminate the agreement?
How much will the rent be and when can this be reviewed?
How will rent be paid and is rent to be paid weekly/fortnightly/monthly?
What is the situation regarding visitors and friends staying over?
Are there any restrictions regarding noise levels?