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Tax Implications of Airbnb Hosting
Letting out a room in your home is a convenient way to boost income but the tax implications of Airbnb hosting must be carefully considered.
Recent figures released by Airbnb show that 12,000 unique hosts welcomed over 800,000 guests to their homes in Ireland last year. Just over half (6,100) of these hosts were in Dublin with the remainder in rural or regional Ireland. Annual earnings for a typical Dublin host were €4,900 according to the Airbnb report. Earnings for a typical rural host were lower at €2,700 in the period from September 2015 to August 2016, according to an earlier report.
Tax implications of Airbnb hosting
Set out below are some points to consider if you are thinking about letting out a room in your home.
Income Tax The first thing to keep in mind is that any income you earn is taxable. If you pay income tax at the higher rate, this means up to half of your Airbnb hosting profits could go in income tax. While you may be able to reduce your tax bill by claiming eligible expenses, such laundry or heat and light, it’s important to check this with Revenue or your tax advisor as underpayment of taxes can prove costly in the long run. (If you are a PAYE taxpayer, you can find out more about non-PAYE earnings here.)
Rent-a-Room Relief Revenue generally regards Airbnb lettings as ‘guest accommodation’ rather than ‘residential accommodation’. Consequently, Revenue considers Airbnb hosting income ineligible for the rent-a-room tax relief scheme. According to information provided on the Revenue website:
“The relief does not apply to rooms that are used for the provision of accommodation to occasional visitors for short periods, including, for example, where the accommodation is provided through online accommodation booking sites.”
Capital Gains While gains on the sale of your home are usually exempt from Capital Gains Tax, this is not always the case. For example, if part of your home has been used for business purposes — such as letting out a room for B&B — this may result in Capital Gains Tax liabilities when you sell your home.
The points covered in this short article are just an indication of some of the tax implications of Airbnb hosting. While the potential to earn additional income may be attractive, it is important to pay the correct taxes on time as underpayment can result in interest and penalties. Contact us for further information and/or to discuss your specific circumstances.
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