Does the rent tax credit apply to student accommodation?

Does the rent tax credit apply to my situation where my son is a first year student living in on-campus accommodation in UCD? The annual cost of the accommodation is over €7,500.

Mr JE

Campus accommodation is not cheap, especially when you consider that the students only have access to it for less than nine months of the year.

How much you pay depends on which of where you are living, and whether you are sharing accommodation or not. The rates this year range from just under €5,500 to just shy of €11,700.

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But the expanded rent tax credit should help defray some of that – 10 per cent in your case, from next year.

The credit is available for the rental of student residence such as the one your son is living in. Originally, when it was announced last year, it would have been your son claiming the credit – and only then if he was paying enough tax for it to work.

With so many people in that position having no taxable income against which to offset the credit, the Government was forced within weeks to extend it, so that parents paying for their children’s accommodation on campus were able to claim the credit for that accommodation.

Ministers will tell you that it is much easier to put these credits in place than to take them away

Unusually, while it was only announced in Budget 2023, back in September 2022, the then minister for finance, Paschal Donohoe, said it would be allowed against 2022 income, assuming enough rent was paid in that year to secure the credit. Normally, measures announced in the budget would only take effect going forward, generally from the following year.

At the time, the Minister said that around 400,000 people would be expected to benefit from the measure. However, just ahead of this year’s budget, Revenue told my colleague Colm Keena that only 203,000 claims had been made in relation to 2022.

Clearly, as your son is in first year at the moment, this is your first opportunity to claim. But for those who did have rent paid in 2022, it is not too late to do so and they should make a claim in the annual return.

The amount you can claim is €500 (which also applied for those with eligible rent in 2022). The good news, from your point of view, is that from next year that figure will rise to €750. And, given Government mutterings ahead of the budget, the likelihood is that it could rise further in subsequent years. There had been talk of it going to €1,000 in this year’s budget, but budgetary demands in other areas saw that figure pulled back.

As of now, the credit is scheduled to run out in 2025 and it might yet do so, but ministers will tell you that it is much easier to put these credits in place than to take them away so it is very possible that it will remain in situ beyond 2025. Not least as there is no real sign of rents moderating much from what have been record levels.

The credit is available for the rental of student residence such as the one your son is living in

The other element of this year’s budget on rent tax credit that you ought to be aware of is that it has been extended now to cover people paying rent under digs or under the rent-a-room scheme in someone’s house. These were previously excluded, but the Government has now brought them into the net and allowed them (or their parents in the case of students) to claim, including for 2022 and 2023.

It might be relevant to you as UCD, in common with most third-level colleges that provide on-campus accommodation, tends to prioritise first year students on campus. Your son is likely to be living off campus in the next academic year and, as long as his landlord is compliant or he is living in rent-a-room, or digs, you will be able to claim the credit for rent paid on his behalf.

To claim the relief, you will have to file a tax return. This sounds daunting to many PAYE earners who have never done a return, but it is actually very straightforward and can be done online, once you set up a MyAccount with Revenue or file a simplified paper Form 12S.