People using Airbnb to rent rooms to holidaymakers have been warned that the Revenue Commissioners could start trawling through properties available on the website to make sure tax is being paid.
About 4,500 properties in Ireland – from castles to caravans – are available to rent on Airbnb, the website that enables people to rent rooms and entire properties to travellers from around the world on a short-stay basis.
An Airbnb spokesman said that’s more than double the number that were available on the service in Ireland last summer.
Landlords providing rental accommodation via Airbnb and similar sites could be liable for capital gains tax if they sell a principal private residence in the future that has been used to provide rented accommodation, should they be deemed to be operating as a business.
Landlords should also take care to ensure that sure they declare the rental income for tax purposes and to keep receipts so they can offset expenses related to the rental activity as certain costs are deductible against rental income. Landlords should note that it is the net rental profit which is taxable, not the gross rent received.
The Revenue Commissioners take the view that as long as the provision of guest house accommodation was “occasional in nature”, expenses such as the cost of providing meals, light, heat or laundering costs, would be allowed to be deducted in calculating the taxable profits.
A capital gains tax liability could also arise for people making all or part of their principal private residence available for rent via sites such as Airbnb.
Exempt
The gains from the sale of a principal private residence (or home) are usually exempt from capital gains tax.
But the Revenue Commissioners said that if all or part of the property had been used for business purposes, including short-term rental accommodation prior to a sale, then a capital gains tax liability would arise on the portion of the property that was used for business purposes. Tax exemption only applies to the portion of the property which was solely for personal use.
The same would apply for conversion of a room to a medical practice, if a doctor or dentist practised at home. This is a long term consideration and the eventual cost may outweigh the short term gains on renting part of the property.