With the increasing popularity of Airbnb in Ireland, many homeowners have been enjoying a little extra tax-free spending money by becoming Airbnb hosts and renting out a room or entire property to tourists or holiday makers.
Assuming the income would fall under the Rent-a-Room Relief scheme, many Airbnb hosts were not declaring this as taxable income. However, Revenue were quick to clarify the situation after seeing the potential loop hole, and unfortunately they did not view the additional income in quite the same light.
So, we thought we’d help shed a bit of light on the issue of taxes for Airbnb hosts in Ireland.
Income from Airbnb rentals is taxable
Income received from renting out a room in your house or the entire property on a short-term basis is taxable. Previously, it was assumed that renting out a room on Airbnb would qualify for the €12,000 tax free threshold under the Rent-a-Room Relief scheme. However amendments to the scheme guidelines now state that short-term lettings are not eligible if they are provided through online accommodation booking sites.
Therefore, you need to declare this additional income to Revenue for taxation purposes. Income from Airbnb rentals is deemed to be trading income and not rental income.
Claim expenses to help reduce your tax bill
It’s not all bad news however! Given that Revenue considers income from your Airbnb rentals as ‘trading income’, it is only reasonable that allowable trading expenses should qualify as deductions. These are expenses like the cost of providing meals, light, heat or laundering costs – as well as repairs and maintenance to guest accommodation areas.
Therefore, it is imperative to keep your receipts for these items so they can be offset against your income to reduce your overall tax bill.
How to declare this income
If you’re a PAYE worker, to declare your additional income to Revenue you need to complete a tax return. This is done via a Form 11 or Form 12, depending on the amount of additional income you have. Where the profit from your additional income is less than €3,174, then you need to complete a Form 12. However, if your profit is €3,174 or more, you need to complete a Self-Assessment return, via a Form 11. Your return needs to be completed by 31st October the following year.
If you are self-employed, you need to declare this as part of your trading income on your annual tax return, via a Form 11.
Thinking of selling? You could get stung for Capital Gains Tax
Unfortunately it doesn’t stop at just taxing your income. Down the line if you decide to sell your property, you could be liable to Capital Gains Tax (CGT) as the property has been used for business purposes.
Normally, the gains from the sale of a principal private residence are exempt from CGT. However, Revenue have said that if all or part of the property has been used for business purposes, including short-term rental accommodation prior to a sale, then a capital gains tax liability would arise on the portion of the property that was used for business purposes. From 2012 onwards, a CGT rate of 33% applies – ouch!
It pays to get your taxes right
Revenue have said that since 2013 it has had access to data from financial institutions related to credit and debit card transactions, which mean it can identify online traders in this area. Therefore, there is no use burying your head in the sand, as it is quite likely that Revenue will be undertaking spot checks in this area and you could be penalised if you have declared this additional income.
For more information, visit Revenue’s website.
Written by Breda Lyster
I’m the expert when it comes to all things Rent at Red Oak. I’ve been working with our Rental Income clients for the past 3 years, so have seen just about everything – from shoeboxes of receipts to ‘the dog ate my homework’ style excuses. It doesn’t matter what state your rental records are in, I’ll get them sorted for you.