Emer Higgins (Dublin Mid West, Fine Gael)
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230. To ask the Minister for Finance if he has considered increasing the rent-a-room tax-free threshold to encourage more homeowners to take up the scheme and to increase available rental supply; and if he will make a statement on the matter. [15357/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The Rent a Room scheme was introduced in Finance Act 2001 as an incentive to encourage individuals to let rooms in their principal private residence as residential accommodation in order to bring about an increase in the availability of rental accommodation.

In accordance with section 216A of the Taxes Consolidation Act 1997, an individual who lets a room or rooms in her or his sole or main residence as residential accommodation may be exempt from income tax, PRSI and USC in respect of income from the letting where the aggregate of the gross rents and any sums for meals or other services supplied with the letting does not exceed the threshold for the year in question, which is €14,000 for 2023. Although the relief applies automatically, the amount of exempt rental income must be included in the individual’s tax return for the year in question.

The upper income threshold has increased several times since its introduction (most recently in Finance Act 2016) to €14,000. The figure of €14,000 would allow an individual to receive income of up to €1,166.66 per month over a 12 month period under the scheme, without it giving rise to a tax liability.

The number of taxpayer units which availed of the Rent a Room relief in respect of the 2004 year of assessment, the earliest year which data are available, was 2,300. Since then, the uptake in the numbers availing of the scheme has increased substantially.

The following table sets out data on the number of taxpayer units availing of the scheme, together with the Exchequer cost of the relief for the years 2016 - 2019 (the latest year for which data are available).

My Department is not aware of evidence which suggests that the current scheme is insufficient.

As the Deputy will appreciate, decisions regarding tax incentives and reliefs are normally made in the context of the annual Budget and Finance Bill process. Such decisions must have regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. The guidelines make clear that any policy proposal which involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures, where a tax-based incentive is more efficient than a direct expenditure intervention.