Rent a room scheme question

eden_my_ass

Just curious (very curious actually) after spotting a comment that once your annual income under the rent a room scheme passes the 7000 limit ( i know thats not the exact figure but approx) you are liable for tax on the FULL income rather than the overrun, which sounds wrong to me but this isn't clear on the government guides either. Anyone renting under this scheme and KNOW whether you pay tax on the excess or on the amount?? I wanted to keep it all above board but I would be looking at just topping that limit this year and I don't want to have to start some daft creative accounting if tax on the full amount is true! :-)

i71jskz5xu42pb

Yes if you go over the 7620 you pay tax on the full amount. It has always been like this.

Revenue is very clear on this.
From http://www.revenue.ie/leaflets/it70.pdf page 7 (my emphasis)

From 6 April 2001, where an individual rents a room (or rooms) in a
“qualifying residence” and the gross rent received, including sums arising for
food, laundry or similar goods and services and the income does not exceed
€7,620 this income will be exempt from income tax by including it in the
individuals tax return.

eden_my_ass

PaschalNee wrote:

Yes if you go over the 7620 you pay tax on the full amount. It has always been like this.

Revenue is very clear on this.
From http://www.revenue.ie/leaflets/it70.pdf page 7 (my emphasis)

Yeah, I'd argue that the quoted statement doesn't explicitly state whether the excess or the full amount becomes liable for tax though, but I'll take your word for it. That being the case, any suggestions for staying within that limit? Can any expenses be used against the actual rental income to reduce its total by end of year?

jdivision

In fairness, given you can only rent out one room under the scheme is it realistic to expect a rent of more than e635 a month for one bedroom?

i71jskz5xu42pb

jdivision wrote:

In fairness, given you can only rent out one room under the scheme is it realistic to expect a rent of more than e635 a month for one bedroom?

You can rent out as many rooms as you want. Read the quote above "(or rooms)"

Victor

eden_my_ass wrote:

That being the case, any suggestions for staying within that limit?

Charge low rents. Essentially keep the service you are offering to a minimum, don't provide your tenants with telephone land line, extra cable TV, etc.

Can any expenses be used against the actual rental income to reduce its total by end of year?

No. You are getting a big tax break and you want more? Specificly the €7,620 includes any money you get from your tenants, including any amounts you charge for "bills".

eden_my_ass

Victor wrote:

No. You are getting a big tax break and you want more? Specificly the €7,620 includes any money you get from your tenants, including any amounts you charge for "bills".

Sorry Victor, but wheres the big tax break if according to the only info posted here, I will be fully taxed if I (by necessity of the cost of mortgage one must cover in this country) have to get more rent than the scheme allows? It seems like another half-excuse for a tax benefit scheme, which is for the normal folk, not the fat cats like myself (struggling to get my first foothold in the crippling irish property market) :-)

I don't want "more", I want to abide by my countries tax laws, rent my rooms legally so my tenants can claim their own rent relief....and not get ridden in the process by the tax man!...phew, rant over :-)

Victor

eden_my_ass wrote:

Sorry Victor, but wheres the big tax break if according to the only info posted here, I will be fully taxed if I (by necessity of the cost of mortgage one must cover in this country) have to get more rent than the scheme allows? It seems like another half-excuse for a tax benefit scheme, which is for the normal folk, not the fat cats like myself (struggling to get my first foothold in the crippling irish property market) :-)

I don't want "more", I want to abide by my countries tax laws, rent my rooms legally so my tenants can claim their own rent relief....and not get ridden in the process by the tax man!...phew, rant over :-)

Sorry, I thought you meant claiming expenses under the Rent-a-Room scheme. If it isn't under that scheme, yes you are allowed deduct expenses.

However, make sure you comply with rules regarding stamp-duty, mortgage interest relief, etc. (primarily that you have to stay living there)

Omikron1

eden_my_ass wrote:

rent my rooms legally so my tenants can claim their own rent relief....and not get ridden in the process by the tax man!...phew, rant over :-)

you said in your first post about creative accounting...maybe u meant legal creative accounting, i dunno, but if u meant just underdeclaring id advise against it if your tenants are sending in rent relief. revenue mightn't be very efficient but they have their stuff together in that regard, all the rent relief forms that are sent in are tied to house and thus the landlord. catching out undeclaring or underdeclaring landlords is why the scheme was actually brought in, the few quid it costs them in tax relief to the tenant is nothing compared to what they were losing with landlords

eden_my_ass

Omikron1 wrote:

you said in your first post about creative accounting...maybe u meant legal creative accounting, i dunno, but if u meant just underdeclaring id advise against it if your tenants are sending in rent relief. revenue mightn't be very efficient but they have their stuff together in that regard, all the rent relief forms that are sent in are tied to house and thus the landlord. catching out undeclaring or underdeclaring landlords is why the scheme was actually brought in, the few quid it costs them in tax relief to the tenant is nothing compared to what they were losing with landlords

I AM trying to do it all legally, thats the problem, playing it by the rules just doesn't seem to work :-) You're dead right that I must declare the same as my tenants do for the rent, thats why the creative accounting on my behalf must be above board accounting....anyway it looks like theres no clear cut answers to this one, like i said already just trying to scrap through this property market as a young, single, first time buyer.....and this goverment just doesn't like me :-(