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A tax question from an Airbnb host

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The self-assessed tax return deadline is approaching which means it’s time for all the Airbnb hosts to declare the income they’ve earned to Revenue.

There’s still quite a lot of confusion as to what people have to declare or how much tax they have to pay. We recently received the following question from an Airbnb host:

This year we earned €2k from Airbnb. If my partner has no other source of income is it correct to say there should be no tax due if the money is declared by her? Am I correct to say if she fills out the relevant tax form with this income declared we will have satisfied our requirements with Revenue?

We put this to our Senior Tax Manager Barry Flanagan. He said that the very basic answer is that if this gentleman’s partner’s only income amounts to 2k, then no tax should be due. This is because their personal tax credit of €1650 per year will more than cover the tax on this amount. However, this income should still be reported to Revenue and there can be other considerations as outlined below.

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1. Firstly, he may not have the option of reporting the income as arising solely to his spouse. In general, profits arising from a property are allocated to each spouse in proportion with their share of the ownership of the asset. If one spouse owns 100% of the property, all the profit arising is therefore taxable under their name. If the property is owned 50/50 by the spouses, then the rental profit should be split equally. It is usually not possible to elect one spouse to be taxed on a disproportionate amount of the profit, any more than you could elect for one spouse to be taxed on a portion of the other spouse’s employment income.

Of course, in this case if the gentleman’s spouse owns the entire property, then his understanding that she won’t owe tax on this income is correct as her tax credits will cover the tax bill. However, he needs to check that he hasn’t already had the benefit of his spouse’s tax credits transferred to him. He can check this on his Tax Credit Certificate or even his latest payslip. 

If his spouse’s personal tax credits have already been applied to his income and utilised in full, then tax will be payable on the Airbnb income. Secondly, if the property isn’t solely in his spouse’s name, there are still ways in which he can lower his tax bill. For example, is he claiming all the expenses? There are many potential expenses that can be offset against the income to reduce the profit. Any cost incurred in providing the service is potentially a deduction and can include the following:

  • The cost of providing meals 
  • Additional insurance taken out 
  • Commission / fees to Airbnb etc.
  • Maintenance fees for cleaning, repairing and decorating the property
  • Accounting and management fees
  • Capital allowances 

He could also claim a deduction for wear and tear on existing fixtures and fittings as well as a deduction of 12.5% for eight years on the cost of new items purchased with the intention of furnishing the Airbnb property.

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2. The second option is to transfer ownership of the property. If the property is currently owned 50/50, a further portion of the property could be transferred to one spouse. As transfers between spouses receive favourable tax treatment, there are no immediate CAT and CGT implications. It is perfectly legal to transfer 20% of one share to the other spouse, which would mean the rental income would be taxable 70/30. Alternatively, the property could be transferred solely to one spouse.

At Taxback.com, we can review your Airbnb income and advise on the tax applications. Register below for a no-obligation consultation. 

About The Author

Sinead Gill - PR & Communications Manager @ Taxback.com

Hello. I live and breathe communications and love finding different and original ways to reach an audience. The challenge lies in trying to keep things fresh even when it’s a topic you’ve covered before. Branding, PR and communications are the three cornerstones of what I do so it’s a very interesting job!

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