As an accommodation provider, your Airbnb profits will likely fall into non-PAYE self-assessable income if your property is owned in your own name. If you own the property in any form of corporate entity such as a company or a trust, then your tax obligations will be complex but you will likely benefit from being taxed under the corporate tax rate for your net profits. If you’re still in a research phase and are not yet holding a property for the intention of being a short-term accommodation provider, the difference in how you structure your “business” can change your tax obligations dramatically and so it is very important to seek professional advice from a licensed advisor prior to purchasing or leasing the intended property.
When is my Airbnb Income Taxable?
If the property is located in Ireland, then there is no question that all of the income on your Airbnb property (after claimable expenses) is taxable. If the property is located outside of Ireland and you are an Irish resident or citizen, chances are there will still be tax implications in both the country where your property is and in Ireland also.
The advice in the rest of this article is based on the assumption that it is an Irish property.
Will I Earn Enough to Affect my Tax?
Statistics published by Airbnb have shown that the average amount earned by an Airbnb host in Ireland came in at €3,900 for 2016. While this might not sound like much, it could be enough to affect which tax bracket you fit into. These figures also don’t account for the fact that some hosts are only letting out a single room in their home as a supplementary income, while others might own additional investment properties for the sole purpose of letting them out as short stay accommodation. In the latter case, real earnings from the Airbnb property are likely to be much higher.
Those who are earning anything greater than €33,800 (inclusive of your Airbnb profits) will be taxed as higher ratepayers and this could be as high as 52% if PSRI and USC are applicable. With potential for such high taxation on your profits, it is worth structuring your business properly from the beginning.
If your property is owned by a corporation, it is likely that the income will be taxed at a corporate tax rate according to your company’s profits. It is worth looking at possibilities of incorporating a company and then leasing your property back to that company who will then operate a short-term letting business through Airbnb. As always, it is of paramount importance to seek professional, licensed legal advice for anything “creative” as there are many situations when this can’t be done, and they must be genuine leases and transactions with money changing hands from you as an individual to your corporate entity.
Revenue has now put an agreement in place with Airbnb for data sharing and as such will see the gross income you have earned from the accommodation platform regardless of whether you report it or not. Obviously, it’s never a good idea to try and cheat Revenue out of their money, but it is especially important to be accurate with your Airbnb earnings as they are visible even before you have lodged your tax paperwork.
While homeowners generally enjoy being capital gains tax exempt in their personal homes when the time comes to sell, being an Airbnb host from your own home means that you’re running a business from there. Depending on when you started running a business from your home and how frequently you had guests, you could be liable for some assessable capital gains on the sale price.
Rent-a-Room Relief and Other Tax Breaks
Rent-a-room relief has been defined by Revenue to not be applicable to rooms let via online platforms. This is because online platforms (namely Airbnb) are designed for the purpose of short-let accommodation which doesn’t fit into the category of residential accommodation for which rent-a-room relief is designed for.
With Airbnb tax obligations being particularly onerous in Ireland, it is very important to be as tax savvy as possible. Understanding what you can offset against your income as a short-stay can be a complex subject so to help clarify the situation, we have also written a guide about claimable expenses.
VAT might not be everyone’s favourite topic to read about, though it is a very important topic to familiarise yourself with if you’re intending to, or currently are an Airbnb host.
If you are registered as being self-employed or are operating the business through a corporate entity, then chances are that you will have to consider your VAT obligations. In either of these scenarios you will probably already be utilising the services of an accountant and so it’s important to discuss your Airbnb intentions with them so they can advise you on how much money you need to set aside for your tax bill.
Many people claim that because VAT is not chargeable on residential rental income, that it does not apply to profits earned through Airbnb. As we can see from the lack of being able to claim rent-a-room relief, Revenue considers short-term accommodation to be different to that of standard rental income and so it throws further confusion over whether VAT is payable.
There have been even greater levels of confusion about the subject because Airbnb issues hosts with a VAT invoice, but that is a separate matter, as that invoice is for their fee as a service provider and is not relevant to you as an accommodation provider.
The information provided on Airbnb’s own website about VAT seems to be referring specifically to the UK and is very vague about implications for other countries. Tax obligations are not something that you want to get wrong so if you have any doubt about what categories you fall under and which taxes are payable, then please feel free to get in touch with us and we will be able to give you accurate advice based upon your individual circumstances