Rent-a-Room Relief

Denis has a salary of €65,000. He has a house, which is separate to his sole or main residence. He received €20,000 gross rental income from this house and he paid allowable expenses of €1,000. (None of which relate to interest on borrowings used in the purchase, improvement or repair of the property.)

In 2021, Denis spent €15,000 on preparing a basement flat in his sole residence for letting. As €10,000 of this qualifies for wear and tear allowance, he can deduct €1,250 if Rent-a-Room Relief not claimed. (Denis cannot deduct the wear and tear allowance if he claims Rent-a-Room Relief.)

2021 tax calculation

Denis let the basement flat for €750 per month for November and December 2021. He spent allowable expenses of €500 on letting and legal fees.

Denis calculates his taxable income for 2021 with a Rent-a-Room Relief:

Denis also calculates his taxable income without Rent-a-Room Relief:

Denis decides opt out of Rent-a-Room Relief in 2021.

Although his rental income from the basement flat is taxable, he can use wear and tear allowances and the €500 expenses. This creates a rental loss of €250 from the letting of the basement flat. He can set this against his taxable rental income from the house.

2022 tax calculation

In 2022 Denis received rents of €9,000 for the basement flat.

Denis calculates his taxable income for 2022 with a Rent-a-Room Relief:

Denis also calculates his taxable income without Rent-a-Room Relief: