Irish still in love with Airbnb despite efforts to tax rental income

Despite the possibility of losing as much as half of their gains on income tax, property owners around Ireland are listing their rooms and homes on Airbnb in ever-greater numbers in the hope of generating some extra funds.

Listings on the property-sharing portal soared 66 per cent in Ireland in the 12 months to August, figures provided by Airbnb show, as homeowners, undaunted by ongoing efforts to claw back tax on rental income earned through the site, sought to earn an extra income.

Travellers to Ireland seeking accommodation via Airbnb also rocketed, up 136 per cent in the year, while the number of Irish travellers staying in an Airbnb rental abroad also soared, up 107 per cent in the year.

A report from Airbnb last December suggested the typical Airbnb host in Ireland earned €2,600 a year renting out space in their home for about 40 nights a year. According to Airbnb, hosts use more than half of their Airbnb income to pay for regular household expenses, including rent and mortgage, with savings and holidays also mentioned – but income tax did not feature.

Revenue guidance

Indeed, there still appears to be some confusion as to whether or not income earned through portals such as Airbnb should be liable to rental income.

Last year, there was uproar among users of the portal when the Revenue Commissioners issued guidance saying that letting out your property via Airbnb was not a one-way route to a tax-free windfall. Rather, those letting a room or a property on the site would be liable to income tax at their marginal rate – plus the universal social charge and PRSI – after deduction of allowable expenses. This means some landlords are subject to tax of as much as 55 per cent on their Airbnb gains, once expenses for cleaning etc, are deducted.

It was previously thought Airbnb would qualify for the rent-a-room scheme, which allows homeowners to earn €12,000 tax-free annually by letting out a room in their home. However, the distinction was made between “permanent” lets – ie to students or long-term tenants – and temporary short-term lets, such as those organised via Airbnb.

"The provision of guest accommodation has never qualified for relief under the rent-a-room scheme," Minister for Finance Michael Noonan said.

But the issue did not end there. Accountancy firm EY has since rowed in to assert that, in its view, “rent-a-room relief should be available to Airbnb Ireland’s hosts”.

Budget

However, it is understood Mr Noonan plans to take steps in the forthcoming budget to prevent Airbnb hosts claiming rent-a-room tax relief, amid fears that it is exacerbating the current rental crisis.

“One of the reasons, but only one, that the amount of rental accommodation in Dublin has been reduced is that quite a number of rooms that were traditionally rented, maybe for students, have become Airbnb rooms, so there is a transfer from the rental market to the tourist industry.The numbers are beginning to stack up,” he said when speaking before the Committee on Budgetary Oversight last week, adding that it was something the committee could look at.

Internationally, countries have taken a different approach to the Airbnb phenomenon. In the UK, property owners will be able, from next April, to earn up to £1,000 from websites such as Airbnb and Ebay without incurring any tax liability.