What counts as rental income?
Rental income is income received from allowing another person use your property, vehicle or other assets in return for money or other benefits of monetary value.
Typical sources of rental income include the following:
- Flats
- Houses
- Timeshares
- Cars
- Caravans
- Boats
- Machinery or equipment
In addition to rent, rental income includes all other payments you receive from your tenant – such as money towards your water bill or rent on your parking space.
Security deposits do not constitute rental income except when used to cover unpaid rent.
Rental income from subletting
Any income from subletting also counts as rental income. Subletting refers to situations where you are yourself a tenant but you let another person use your rental property and charge them rent or a similar consideration in return. You receive rental income from the subtenant.
The rent you receive from subtenants is taxable capital income for you, the principal tenant. However, any costs incurred from the tenancy can be deducted. One such cost would be the portion of the total rent that you pay to the landlord for the part of the property that your subtenant uses.
Example: Hanna rents a 65-m2 flat. Her rent is €1,500 per month. This includes electricity and water.
As of 1 March 2023, Hanna has been subletting a 12-m2 room in the flat to Heidi. The girls share the kitchen and the bathroom, which together measure 28 m2. Heidi pays Hanna €700 per month for rent.
Hanna’s rental income for 2023 amounts to €700 × 10 months = €7,000. She can deduct any costs that she must pay relating to her rental operation. A part of the rent that Hanna herself pays to the landlord counts as costs. Hanna’s costs comprise the amount of rent that represents the part of the flat that is occupied by Heidi: (12 m2 + 28 m2 × 50%) / 65 m2 × €1,500 × 10 months = €6,000. Hanna’s taxable rental income therefore amounts to €1,000 for the entire year.
Tax payable on rental income
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