Airbnb hosts may be able to cut their tax bill
The advice comes just two months after Revenue amendments to the ‘Rent-a-Room’ tax relief meant that people offering accommodation on Airbnb are liable for tax on that income.
The move appeared to dash the hopes of a cash windfall for Irish people offering the service.
However, tax consultant at Taxback.com Barry Flanagan “there are still quite a few grey areas in relation to Capital Gains Tax (CGT) and other tax issues when it comes to Airbnb” and said the group had received calls from people still unsure about their tax liabilities.
“Revenue has stated clearly that any income earned through renting out your room/ apartment/ home through Airbnb will be treated as taxable income and must be declared.
"This came as a bit of a blow to people acting as Airbnb hosts who thought it might be an easy way to earn a bit of cash on the side — many people believed that the activity would fall under the rent-a-room tax relief threshold of €12,000,” he said.
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However, the tax experts have advised Airbnb hosts that all may not be lost and that there still may be ways to reduce their tax bill as a result of offering the service.
“We are advising people to keep a record and receipts of any expenses incurred through this activity. Revenue have concluded this income should be treated as trading income and therefore it stands to reason that any allowable trading expenses should qualify as deductions in arriving at a taxable trading profit.”
“The test for whether the expenses are allowable is the same standard as for any other trade — are the expenses incurred wholly and exclusively for the provision of the service in the ordinary course of business,” said Mr Flanagan.
Taxback.com say that Revenue distinguished short-term ‘guest’ lettings from a longer term ‘residential’ letting. The group pointed out that traditionally income from a ‘brick and mortar’ B&B is subject to different tax treatment than income generated from renting a room in your house.
The distinction is that people who run a B&B are considered to be engaged in a trade while someone who rents a room in their house is not. Many availing of rent a room relief would have other professions — that income is more incidental or casual.
Taxback.com pointed out that Revenue has considered the position for Airbnb and decided that the Airbnb landlord is closer to a traditional B&B landlord than to an individual who rents a room for ‘residential’ rather than ‘guest’ purposes.
“If you are renting out rooms in your home as a B&B then this is essentially a ‘change of use’ from residential to business purposes. The same would apply for conversion of a room to a surgery, if a doctor or dentist practiced at home. The extent of (PPR) relief is therefore restricted — you can no longer claim PPR on the whole house as part is now a business premises rather than a residence,” said Mr Flanagan.
Earlier this month, Airbnb confirmed it will double its workforce in Ireland to 200 employees by the end of this year.
The six-year-old San Francisco-headquartered firm announced in September that it had chosen Dublin as the location for its European headquarters, with 100 jobs initially earmarked for the base.
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Quirky offers
In eight years Airbnb has gone from an idea Joe Gebbia and Brian Chesky had when they were struggling to pay their rent to a global room-letting giant valued at $20bn (€18.75bn).
Struggling to pay for their loft apartment in San Francisco in 2007, the pair turned their living room into a B&B, offering space for three guests and a homemade breakfast. Airbnb was born and the next year technical architect Nathan Blecharczyk was listed as a third co-founder.
Anyone, anywhere can list a space on the website and rent it to travellers, or can log in and book a night in someone else’s place. It has over 800,000 listings in 33,000 cities and 192 countries.
The types of room available can be diverse — from a spot on a couch or in a treehouse to a room in a castle.
For €130, four people can stay in a converted barn on working farm near Midleton. Complete with a six acre vista on coastal setting, it has “panoramic sea views” and is a stone’s throw from a beach: www.airbnb.ie/rooms/1673859
For €123 per night, Peter invites travellers to “live like a king in my castle”. You’ll be staying in the master bedroom at the top of the 600-year-old castle. Expect “lots of winding staircases” in a building that’s “not pristine, it’s not perfect, but it’s a real castle”. www.airbnb.ie/rooms/658697?s=553L
At €450 a night and housing two people, this is a little more pricey but you get to stay in a national monument — a 1804 coastal defense Martello Tower in Dublin’s plush seaside town of Dalkey. www.airbnb.ie/rooms/4263088
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