Tax Implications for Airbnb hosts

Irish Startup Stories – Episode 010: Shane Reilly, Moyee Coffee
April 26, 2017
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Tax Implications for Airbnb hosts

 

Airbnb keyring

Being an Airbnb host not only gives you an opportunity to meet and greet people from all over the world, but it also brings in a nice little bit of extra income. Hosts often use that income to help with their mortgage repayments or perhaps to fund a nice holiday for themselves each year. From whatever way you look at it, it can be a truly rewarding experience to open your home to others.

However, part of the responsibility of being a host in Ireland is to accurately declare your profits to Revenue which will be taxable. See our FAQ’s below which may help you understand your own tax position as a host.

If you need help in filing your own tax return, feel free to contact us today for advice and assistance.

Do I have an obligation to report as a Host?
Yes, as a host you must declare your income and expenditure to Revenue each year. This can be done by filing either a Form 12 (for PAYE earners with non-PAYE income of less than €5,000 in 2016) or a Form 11 (for self-assessed individuals or those who have PAYE income greater than €5,000 in 2016).

What about Rent-a-room relief? Can I avail of that as an Airbnb host?
Rent-a-room relief allows landlords to avail of up to €14,000 (2017) tax free for room lettings to “long-term” and “residential” tenants. Unfortunately for Airbnb hosts, guests are generally neither long-term nor residential. And even if so, Rent-a-room relief is not applicable for rental income from online platforms according to Revenue’s interpretation of the law.

If I don’t report anything, will Revenue ever know?
Well firstly, not reporting is never a good idea as Revenue will take a dim view of those found to be deliberately undeclaring additional income. In addition, as part of its Reporting Obligations under Sections 888 and 890 of the Taxes Consolidation Act 1997, Airbnb provides Revenue with information on rental income earned by its hosts including names, addresses, amounts paid and dates. So Revenue do indeed know!

I am not Irish and / or I am not Irish resident. Do I still need to report?
Yes in both cases. Regardless of whether or not you are living in Ireland or a foreign national, you must declare income from any property rented in Ireland to Revenue. In addition, if you are Irish tax resident and you have properties abroad from which you earn income, these must also be reported to Revenue as part of your worldwide income.

What exactly must I report to Revenue?
You must report the relevant income and allowable expenses of your trade – i.e. your profits.

What sort of expenses can I claim to offset against my income and reduce my tax liability?
There are a number of direct and indirect costs that are allowable, many of which are often forgotten by hosts. These include:

  • host fees
  • cleaning costs incurred before, during and after hosting
  • food and drink provided to guests
  • “additional” insurance taken out to cover you as a host
  • accountancy fees related to the filing of your tax return
  • repairs and maintenance fees incurred for guest accommodation areas
  • pre-letting expenses incurred for preparing a room specifically for hosting
  • portion of your home utility bills (electricity, heating, broadband) that can be attributed to your hosting
  • portion of your mortgage interest relating to the rented area
  • wear and tear allowance on capital items purchased (e.g. bed, furniture)

Do I need a receipt for all the items I claim as an allowable expense?
Yes, proof of expense is needed for all items claimed so make sure to start tracking now! A great (and 100% free!) way of doing this is through our fantastic new app – Paddy Quinn & Co. Recording receipts on the go is easy through our Receipt Manager feature, meaning you never have to worry about holding on to paper receipts again. This is just one of the many great features of our app which you can download for free by clicking here for App Store users or here for Google Play users.

Can I claim for my own time as an expense?
Unfortunately not as a self-assessed individual.

I haven’t reported to date. Will I face penalties?
Individuals who have not reported income by the appropriate filing deadline may be subject to fines and penalties. It is always much better to contact Revenue before Revenue contact you to report previously undeclared income. The ability to file an “unprompted qualifying disclosure” and therefore avail of lesser penalties and fines, may be lost if Revenue come knocking on your door.

How much tax will I have to pay?
That is all dependent on your own individual circumstances. Standard rate taxpayers (those with overall income in 2018 of less than €34,550) pay tax at 20%. Those above, known as higher rate taxpayers, pay tax at 40%. But don’t forget that this income is also subject to USC & PRSI which can possibly push your marginal tax rate as high as 52%.

Do I file a Form 11 or a Form 12 then?
Again, this will depend on your own situation. If you are a PAYE worker and earn less that €5,000 in non-PAYE income, you file what is known as a Form 12. This can be done relatively easily on PAYE anytime and is due by 31 October each year.
For everyone else, a more detailed tax return known as a Form 11, must be filed by 31 October each year and is done through ROS (Revenue Online Services). And don’t forget that if this is your first year in filing a Form 11, you will also have to pay Preliminary Tax for the current year, meaning that quite often there is a double payment with your first return.

How can you make it simple?
A very easy way to keep expense tracking simple is through the Receipt Manager feature on our fantastic new app – Paddy Quinn & Co. This app is free for all to download in the App Store and Google Play and includes many other great features such as Milege Tracker, Tax Calculators, Budget News and much more. Find our links below:

App Store

Google Play

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I am a full-time host and want to manage my business on a much more regular basis. What sort of help can you provide?
We are experts in the field of start-ups and small businesses, and offer a variety of packages tailored to suit your business needs. These include cloud accountancy software licences, bookkeeping, VAT, payroll, company incorporations, CRO filings, year-end financial statements and much more. See our range of pricing options on our Pricing tab.