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Money Times - August 18, 2015

Posted by Jill Kerby on August 18 2015 @ 09:00

CONSIDER ALL THE TAX IMPLICATIONS BEFORE YOU ‘AIRBNB’

In a fight between the Revenue Commissioners and the owners of the 9,000 Airbnb listings from Ireland, I know what side I’d back. 

Last week’s announcement that Airbnb had handed over the listing details of their Irish website users to the Revenue shouldn’t really come as any surprise to the people who’s been listing their rooms or properties for the past two years. 

Back in February the Revenue made it clear that they did not consider Airbnb earnings as qualifying under their Rent-a-Room scheme which allows for up to €12,000 worth of tax-free income from residential lettings of rooms in a person’s home.

According to the Revenue, the rent-a-room relief only applies to rooms rented on a long-term basis. “Income from the provision of accommodation to occasional visitors for short periods would not qualify for rent-a-room relief as the visitors use the accommodation as guest accommodation rather than residential purposes.”

Judging from reports in the papers and on the airwaves a lot of Airbnb hosts are not happy that their details have been handed over to the Revenue or that they may have to pay tax. But even on their website, Airbnb has always maintained that the onus is on the host to determine whether they have to pay tax or not (in the UK, they do not) and this may include VAT as well (which it does in Ireland.)  

It suggests that if tax is payable, “you can usually either incorporate it into your nightly price, add it within a ’Special Offer’ or ask your guests to pay it in person. In each case, it's important that guests are informed of the exact tax amount prior to booking. If you choose to collect tax outside of your listing's rates, please note that it should be collected only upon arrival and that we are unable to assist with collection.”

There has also been some speculation as to whether Airbnb will challenge the Revenues’ decision not to allow the rent-a-room relief on Airbnb earnings.  But the tax is not payable by Airbnb and if any challenge was going to happen surely it would have been last February when Revenue made it clear that Airbnb lettings – which are commercial and short-term - did not qualify under the rent-a-room scheme definition. 

Since most Irish Airbnb hosts only began listing their properties in 2014, they are still within their tax reporting deadline: rental income for 2014 only falls due on October 31, the first file and pay their tax. (It is mid-November if you file on-line at  HYPERLINK "http://www.ros.ie" www.ros.ie.)

 

According to Sandra Gannon of TAB Taxation Service (and my co-author of the TAB Guide to Money Pensions & Tax 2015) “if you have income from Airbnb you can claim all sorts of expenses to reduce any tax bill. These include a portion of your heat and light bills, broadband or phone, insurance, food you may provide, your laundry costs, a certain amount for fittings and even Airbnb’s fee. Rental income is subject to income tax, USC, PRSI and for many people will amount to 51% of gross rental earnings if they already earn over €33,800. So keep all your receipts and bills and speak to tax adviser before you file and pay.”

Airbnb is here to stay. If everyone has to pony up for the tax, the nightly rate may go up, but with a typical cost in Dublin of about at c$60 a night and c$40 outside of it, a 20% price hike should go some way, after legitimate deductions, to meeting that Revenue bill. 

Letting a room once a week at €60 for 52 weeks is an extra €3,120 income, which many people will certainly welcome.  But income like that can tip some people into a higher tax band, trigger disqualification for certain social welfare payments and even a CGT payment if and when you sell your home.

This is certainly the case for B&B owners who have to offset the income they’ve earned over the years with the 33% CGT liability they will have to make on the portion of the value of property from when they began using it as a B&B and its sale value. 

Airbnb (and non-tax paying hosts) has been criticised for taking business away from legitimate, tax-paying B&Bs and hotels, but also for taking rooms out of circulation that may have otherwise been let out to students. There’s no hard evidence to support this, though I’ve heard plenty of people suggest they’d prefer to Airbnb a spare room even just two nights a week for €120 (tax-free) than charge the same to a student via rent-a-room and have them live in their home for nine months. 

They may want to think again. Nothing beats the €12,000 tax free income from the rent-a-room scheme, especially now that the Revenue have re-iterated that Airbnb income is fully taxable. 

If you have a personal finance question for Jill, please email her at HYPERLINK "mailto:jill@jillkerby.ie"jill@jillkerby.ie or write to her c/o this paper.

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