Question of Finance: Earn €10,000 tax free from renting out rooms
Q I have received a pay reduction at work and as a result have come under significant financial pressure.
I bought my first home as a first-time buyer a year ago and I'm struggling with the repayments.
I am considering renting out a room in my house to generate some extra income.
Can you advise me as to what this involves?
A If you purchased your new home and availed of the exemption to stamp duty on the house/apartment purchase, you have an option to rent out furnished accommodation on part of your home under the Revenue-approved rent-a-room scheme and earn up to €10,000 per annum tax free without affecting your status as a homeowner.
To me this seems like a good option for you for a variety of reasons. On a practical level, it should be much easier to manage and maintain your property when living in it.
Also, some people choose to vacate their property altogether and rent the entire house without informing the Revenue.
However, there is anecdotal evidence to suggest that the Revenue is carrying out spot checks on first-time buyer properties to see that they are still owner occupied. There have been cases where random checks have resulted in Revenue discovering properties that were the subject of a first-time buyer mortgage and exempt from stamp duty, but were not occupied by the owner for the full two years.
In this instance, the Revenue may claw back the stamp duty and levy hefty interest and penalties for deliberate non-disclosure.
I think you should take expert advice before deciding either way but to me it would probably make sense for you to remain as an owner-occupier of your property if personal circumstances permit this.
- Brian Duffy, managing director, DFS & Co accountants and business advisers.