Are you an Airbnb host? Here’s how to reduce your income tax bill

These top expensing tips can save you a lot of money

There’s no doubt about it: Business is booming for Airbnb. 

Today, there are over 9,100 places to stay across Ireland. And there’s no shortage of demand. Since launching in 2009, a whopping 650,000 people have used the app for accommodation when holidaying in Ireland. This has earned hosts an average of €2,700 in much needed extra income every year. In fact, almost 60% of Irish hosts say the additional income has helped them to stay in their homes.

What are my tax obligations?

However, if you are a host, it’s important to remember that tax will be due on any income you receive. In short, Airbnb income doesn’t qualify for rent-a-room relief and you’ll need to fill out a tax return each year by October 31st.

The form that you complete depends on whether Revenue considers your earnings to be Case I ‘trading’ income or Case IV ‘miscellaneous’ income.

Revenue will likely consider your income as Case I ‘trading’ if:

• you rent out the room or property on 6 or more occasions annually
• or if you host for 30 or more nights in a year
• or your Airbnb income exceeds €5,000 in a year
• or the property is available for occupancy all the time

If your Airbnb business falls under Case I ‘trading’ income then you’ll first need to register with Revenue by completing a TR 1 form. The next step will be to file a Form 11 tax return each year. You should complete a Form 12 if your Airbnb income is less than €5000 in one year as the income is not coded into your tax credit.

It’s not all bad news though. There are a number of deductibles that you can use to significantly reduce your Airbnb tax bill and help you claim tax back in Ireland.

Expenses 

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We’ve created a useful list below of costs you may be able to deduct from your Airbnb income.

However, when it comes to expenses, the first thing to remember is that you can only deduct costs incurred ‘wholly’ and ‘exclusively’ from running your Airbnb accommodation. In other words, if only part of the cost is associated with your Airbnb trade, then you can only expense the appropriate amount and not the entire expense.

You’ll also need to keep a detailed track of your expenses, and all of your invoices and receipts safe. This will save you a lot of time and stress should the Taxman come calling for an audit.

With that in mind, here are 9 things you can expense on your Airbnb tax return (and a few things you can’t!)

1)      Repairs and maintenance

Nobody wants to set off on a holiday only to arrive at their accommodation to find a rundown shack. That’s a sure-fire way to earn a bad review. So, it’s in everyone’s interest to ensure that you pay all necessary maintenance costs to keep your property at a suitable standard for guests.

The good news is that you’ll be able to expense repair and maintenance costs, including those listed below  

• replacing broken windows and locks,
• servicing boilers
• Supplying new furnishings and fittings
• Purchased cleaning supplies
• Don’t forget to include laundry costs!

2)      Agent fees

In many cases, money is transferred electronically between guests and Airbnb hosts. If you prefer to receive cash, and you use an intermediary to collect fees (for example if you are a non-resident), this service is tax-deductible.

You can also expense the service fees (currently levied at 3% of the total reservation) that every host is charged by Airbnb.

3)      Utilities

Nightmare! Your guest has travelled across the country to stay in your spare room. Instead of enjoying the lovely scenery and exploring the local attractions, they preferred to stay in using your Wi-Fi to watch movies. And what’s worse, they asked for the heating to be left on all day, and it’s the middle of summer!

But don’t be too upset. Your utilities - gas, electricity, TV and internet - can all be expensed come tax return time.

4)      Local Service Charges

You can also expense any local council costs relating to your rental property, including rubbish collection and recycling. Of course, if you choose to pass these charges to your guests, you can’t claim them back later as an expense.

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5)      Advertising

Need to attract more attention to your Airbnb offering? No problem! Anything you pay towards publicising property you want to rent is fully claimable as an expense.

6)       Legal or Accounting Fees

If the bureaucratic side of letting property is getting you down, fear not. You can expense any legal or accounting fees you have paid which relate to letting out your Airbnb property. For example, if you have paid for professional advice relating to Stamp Duty, you can include this as a deduction.

7)       Insurance

Insurance is a big expense that many Airbnbers are not aware they can expense. In short, if you've taken out any insurance policy relating to a rental property, you're entitled to claim expenses on any premiums you have had to pay.

But don’t forget, if you are renting out a room within your own home, you’ll not be able to expense the entire premium.

8)       Mortgage

You can also claim tax relief if you are paying interest on a mortgage taken out to buy or improve the property that you have listed on Airbnb.

9)       Conference

Thinking of becoming an Airbnb host but don’t know where to start? You might consider attending a conference or seminar to help you get set up. The good news is that all registration fees for relevant conferences or education on property management can be included as a tax deductible.

And here’s some things you can’t expense

• Stamp Duty

If you purchase a property with the intention of renting it out, you'll have to pay 1% Stamp Duty on any purchase up to €1,000,000 and 2% balance on any amount above that. It’s important to keep in mind that money paid on Stamp Duty can’t be expensed against your Airbnb earnings.

• Food

Food is very rarely allowable as an expense. Should an event arise where you undertake a business trip related to your Airbnb accommodation, you can expense any related food costs from the trip.

However, if you want to boost your accommodation by offering a free welcome basket of fruit to your guests, you can’t include these costs as an expense.

• Commuting

And finally, if you are non-resident at your Airbnb offering, you can’t expense any costs that occur from traveling to and from the accommodation.

Note: These deductions are mainly associated with Case I ‘trading’ income. Fewer expenses are allowed under Case IV ‘miscellaneous’ income and each expense is assessed by Revenue on a case-by-case basis to determine if it is allowable.

Contact us today!

Got some questions on your Airbnb income tax? Taxback.com has a team of Tax Advisors who are on hand and happy to help. Our self-assessed tax return service will make sure that you are fully compliant with the Revenue guidelines. We can file your Airbnb tax return and make sure you are availing of all applicable tax relief associated with being an Airbnb host.

Contact us today for a no obligation quote