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Tax rules on renting out a room in your house

By: Julie van Keulen

Do you have a spare room and are you thinking about renting out a room? Do you have a family member that you would like to advise on renting out a room? Or are you simply curious about the latest tax rules in this area? We totally understand. Tax-is-exciting!

Tax rules regarding renting out a room

How does it work if you rent out a room in your house? If you rent out a room in your house, the tax-rules that apply to you depend on your situation. You either own the house or you rent the house.

If you own the house, you can use the landlord exemption (next paragraph). If you rent the house, you can read the last paragraph.

Landlord exemption (kamerverhuurvrijstelling)

To enable tax-free rental, the so called landlord exemption has been created. This means that up to an amount of €5.506, you do not need to pay taxes on received rent as a house-owner. This exemption can be used on three conditions.

The first condition: you do not provide any services next to renting the house, such as providing bedlinen, breakfast or city-tours. If you do so, the Dutch tax authorities will label the rental as temporary rental. Renting out a room in your house, e.g. through Airbnb, is classified under temporary rental. Temporary rental is taxed with income tax. This means that 70% of the rent is taxed.

The second condition is that both the person that rents the room and you are registered at the address (at the municipality).

The last condition concerns the room: the room must not be an independent residence.

Do you receive more than €5.506 rent? In that case you will be paying tax. The rented part of the house is being taxed as it classifies as ‘savings and investments’ (next paragraph).

Tax rules on renting out a room in your house

More than €5.506? Rent is taxable.

If you own a house, all mortgage-costs (such as mortgage interest) are deductible: these costs are deducted from your taxable income. If you rent out a room in the house and you receive more than €5.506 rent, there is no right to deduct mortgage interest on that part of the house.

Renting out a room in a rented house

If you rent the house, there is no maximum of rent to receive tax-free on one condition: you do not provide any services next to renting the house, such as providing bedlinen, breakfast or city-tours. When you do so, the Dutch tax authorities qualifies renting the room as so called ‘result from other work’. If you do a lot of work for the rental, the authorities can even qualify the work as an enterprise. In that case, the profit will be taxed as operating profits. In other words: if you do not wish to pay taxes, you should keep it simple!

Tax-is-exciting

The Kamerverhuurvrijstelling (landlord exemption) looks a good solution. However, on a monthly bases at the current rates of housing the amount might not be high enough. If you exceed the amount, the full exemption is no longer applicable.

Sorry for the dashes in the middle of the word tax-is-exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.

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