Recently, I received a response from the PAYE division of the Revenue regarding the uncertainty I had about the availability of tax relief for part-time student rents. I am frequently hosting Spanish students who are underage for a couple of weeks or months at a time. The response I received clearly stated that there is no qualifying tax relief for such a situation.
The communication further detailed that there is no tax break provided for renting out to part-time students, explaining that the rental income should be declared as untreated income at the end of the financial year because it’s taxable. The availability of the rent-a-room relief was specified to be for long-term rentals of rooms within your residence.
The information provided by the PAYE team member seems to be misleading. As far as I’m aware, the rent a room relief, which is a valuable tool for ordinary taxpayers without the need for advanced legal or tax consultancy services, is quite straightforward. It permits taxpayers a tax-free receipt of up to €14,000 per tax year from the rental of a room within their residence.
Obviously, there’s fine print to this clause, with terms and exceptions. Key stipulations include that the property being rented must be your primary residence or its annex, but not other owned properties. It doesn’t cover rental to immediate family members, such as your offspring, but extends to rental agreements with nephews, nieces or on behalf of your employer.
Furthermore, the €14,000 annual rental cap is comprehensive and final. If additional charges like those for meals or laundry are added to the rent, it should be considered in the income calculation. In the scenario where the rental income crosses the €14,000 limit by even a single euro, the entire rental income earned is subject to taxation.
Maintaining accurate records and ensuring adherence to the income limit is essential, as an extra €14,000 in tax-free income can be a significant relief for many households. A crucial aspect to remember is that the let must be long term – defined as a continuous rental period of no less than 28 days. This rule has been in effect since January 2019 and intends to discourage its application to short-term vacation rentals, such as those found on Airbnb and similar platforms.
You’ve noted that the students staying with you typically stay for a month or two. Based on these circumstances, it appears that they unequivocally fall within the parameters set by the legislation: they have no familial relation to you, live in your residence, and are staying for more than the required 28 days.
Even if the duration of their visit was shorter, as is often the case with Irish households hosting foreign language students over the summer, it appears that you would still qualify for the relief, according to Revenue’s own guidelines.
Next, let’s explore the exemptions. These are outlined in section 316A(3)(c) of the Taxes Consolidation Act 1997 as amended. Three main categories of exemptions exist. The first pertains to when the room is let to someone with physical or mental disabilities. The second covers ‘digs’, whereby students, primarily, can reside for the minimum four-week requirement but only for four nights a week as they return home on weekends.
Finally, the third exemption mentioned does not adhere to the 28-day rule if the occupant of the room(s)…is partaking in full-time or part-time education at an in-state institution such as a university, school or other educational establishment.
Moreover, the Tax and Duty Manual from Revenue, updated most recently in July of last year, refers to these exemptions, stating, “the exceptions cover situations such as lettings for respite care for incapacitated individuals, board for full or part-time students, including language learners, and four-day-a-week ‘digs.'” This provision appears to specifically address the scenario of hosting foreign language students and, importantly, includes part-time students, contrary to the information provided by Revenue.
No, the given restrictions cannot be applicable solely to students who are living with you for an academic semester or year due to the specifics of the 28-day limitation. This covers even language students’ stay for a period of under four weeks, provided they are enrolled in a course while they are here.
The tax and duty manuals issued by the Revenue are defined as comprehensive documents comprising rules, standards, procedures, and practices that regulate all activities associated with the Revenue. Moreover, these manuals are characterised on the Revenue’s online portal as developed to offer support to Revenue personnel to tackle complications arising from tax laws.
I encounter no implication in either the law or associated directives that the accessibility of these policies varies merely on the basis students being underage, nor have I ever come across such a differentiation.
So, it seems someone has either dispensed directives without fully comprehending the policies (and how the Revenue Manual advises to interpret those laws), or the rules have undergone a change that has not been communicated.
From your correspondence, it’s clear to me that you have a better understanding of the Revenue Commissioners’ operations than I do and are able to discern between when you’re receiving a straightforward response and when someone is obfuscating the issue. This insight appears to have guided your resolution to validate the advice with us.
I am at a loss as to whether the signee of the advice you’ve acquired personally determined the correct course of action, or simply relayed their superiors’ judgment. I will not disclose their identity or that of the Revenue to avoid embarrassment as it’s evident from your concise communique that you are adhering to all requisites concerning the rent-a-room relief scheme, despite their error.