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ACROSS THE GLOBE there are protests against the burgeoning sharing economy that is being driven by companies like Uber and Airbnb. There have been legal challenges and even riots in response to the latest example of the creative destruction of capitalism. In Ireland we have just been getting on with it without fuss, right up the point this week when the sacred property market and the reviled taxman became involved.
Revenue got around to contemplating the amount of ordinary households that are renting rooms on Airbnb, and issued a diktat to the company to hand over the details of all their hosts. Investigations concerning tax liabilities from years gone by would soon follow. Ever level-headed media reports spoke of waves of tax audits, big bills and even prosecutions to follow.
Struggling
The whole thing pricked a certain nerve we have in this country where the little people are concerned. Our poor mammies, goes the thinking, are struggling to get by. They’re renting out a lovely room in their well-kept homes to weary travellers, at much more reasonable rates than those big-business hoteliers. Now that bloody taxman, probably at the behest of Phil Hogan himself, is going to come take food from the table to pay more bondholders. And did I mention nobody went to jail over that there recession we had? It’s terdible, Joe.
Airbnb hosts do have a fair point that the guidelines on tax relief for renting a room may not have been as clear as could be. Revenue seem to be acknowledging that and are promising that there will be no prosecutions over arrears, though they’ve not said they’ll lay off chasing for tax they say is owed. The accountants and legal experts at Ernst & Young, and Airbnb themselves, claim that there is nothing in the wording around the tax exemptions for rent-a-room to say it excludes this sort of short term, commercial letting.
This looks like another area where explicit rules, in this case surrounding a tax relief program, have not caught up to technological and economic advancements put forward by Silicon Valley. Revenue will want to close any loopholes, or just affirm that they don’t exist. Populist politicians and commentators have been piling in to say that the little people shouldn’t be targeted for tax at all, and will promise to regulate specific exemptions for folks renting rooms in this way.
Householders
As per usual when it comes to tax reliefs, people are confusing mode and outcome. The €12,000 rent-a-room tax relief, which was raised from €10,000 a year in recent budgets, is not designed to help struggling householders. That it does is a simple, tangible and popular effect that politicians can point to. But householders are just the mode to achieving an outcome: The provision of more rooms available for rent in our highly pressed housing market.
The relief is designed to encourage people to let out spare rooms in their houses that otherwise sit idle. Because of our very low threshold on earnings entering the higher rate of tax, it is likely that most people considering renting a room would think it financially unappetizing if they were only getting half of what they let the room to the tenant for. So the government encourages them to let the room by allowing them to keep all the income tax free, up to the reasonable limit of €1,000 a month that is likely to be reached by people with several spare rooms.
If, as has been suggested, we allow people to avail of this relief for the purpose of short-term commercial letting to tourists and business travellers, we will further screw the property market for students and professionals. If you let a room for between €300-500 per month, it’s effectively €9.86-16.43 a night. The average nightly rate in Dublin for a private room in the college season of October on Airbnb is €54. €30 a night is pretty much the cheapest you want to go.
Professionals and students
If people letting commercially are allowed avail of the tax relief, it makes considerably more economic sense to rent a room in your house on Airbnb than to a long term professional or student tenant. A room that can command €300 long term could net you up to €930 a month on Airbnb. If, however, you’re taxed on that income as normal then you’re looking at getting as little as €446 for renting it commercially. With that premium, you’d have to ask yourself if you’d rather the stability of a long-term tenant. You may not fill the room every night on Airbnb, will have the hassle of advertising it, dealing with enquiries, cleaning and so on. A near-guaranteed tenancy for the college or full year makes a lot more sense.
I’m rarely one to sing the praises of any tax, but in this case we must use the tool of the rent-a-room scheme appropriately to the problem we are most looking to fix. Tax reliefs distort the market by encouraging people to do one thing over another. If we have a housing crisis for students and professionals, we want the tax relief for letting rooms to alleviate that problem first and foremost.
Allowing that relief to be used to rent rooms at higher rates to tourists is counterproductive in the extreme.
Aaron McKenna is a businessman and columnist for TheJournal.ie. You can follow him on Twitter here.
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Verbose and long winded….
A much simpler argument goes as follows…
- rent a room scheme is designed to help those looking for accommodation in tight markets. Eg students in Dublin.
- airbnb facilities short term rental which competes with hotels and guest houses who do pay taxes.
- airbnb is as such commercial renting and should be taxed.
- otherwise hotels, guesthouses, commercial landlords etc should lso be exempt from taxes.
- in that case then none of us should pay any taxes!!
- unfortunately in this life taxes and death are a necessity….
Lol love how said ‘verbose AND long winded’ a statement which is itself verbose.
Bit to complicated for you Kevin. I know its a Saturday morning but get yourself a coffee chap and concentrate.
Really well written article with the tax brackets explained clearly for the first time in any report i have seen do far. I personally know two people using this to rent holiday homes in the sunny south east and don’t pay a bean of tax. Why should the rest if us carry the can and get stuck with there local rates/taxes because they are being sly
It’s simple ‘Anyone using country’s resources to make a profit is taxable unless the country want you to be tax free’
Ireland has a choice to make on this one. go down the no tax republican route and hope for the best or go down the nordic route for well funded public services.
Sir, you lost me half way through the article. I am an AIRBNB host. I’m loving the experience and I’m looking forward to dropping over to my local tax office next Wednesday to settle my arrears. I’m delighted that my AIRBNB income is to be taxed as it will get rid of a lot of cowboys who considered AIRBNB revenue a nice little earner. Regards.
Very good article. Makes total sense
This isn’t a one size fits all situation. Not everyone rents in a city or a place with a big university. There are many people in rural areas who would never be able to take in a professional person or a student but they can keep themselves ticking over by taking in tourists.
It’s a win win for them and the area. They are bringing people to areas that tourists might not get to and they are keeping themselves ticking over financially.
To tar everyone with the same brush is very blinkered.
You don’t know everyone’s situation it might not be possible for them to take in a permanent tenant.
And while you say it was never meant to help people earn money the fact is it had become a life line for some people.
One that you want to take away?
No Abbi. People are not being told that they can’t earn the income, they are being told that they have to pay the required tax on it. This may change the economics for some people, but they are not being told that they can’t earn the income.
Not to mention there are many students who would prefer a 9mth lease… And the school year ends, just as the high demand tourists season starts.
A smart landlord would rent their property out to students sept-may and put it on airbnb june-August to get the maximum returns.
Your argument seems to apply equally to regular B&B Hosts. Should they pay no tax on their income too?
i’m aware of some landlords now letting out rooms through this lot but leaving one tenant there to do the walking and the talking. i’m also aware some of these tenants are on SW, possibly even RA. So are they effectively part of the landlords business model now while claiming SW and maybe even RA? Is that allowed does anyone know? I mean they are hosting, doing a job for their landlord.
You only pay tax on profits, not income. Reasonable expenses can be deducted from income.
@paudi. Yep. Good move. Turn the tables and blame the unemployed tenants! It couldn’t possibly be the landlord’s fault.
yep i know its a good move : ) but if they’re on SW and perhaps getting extra out of the landlords income for doing the work? I mean, for professional tenants doing this job, it would have to be after work, viewings, then what about checking out? The tenant has to be in work that morning, chuck them out before you go or trust they’ll leave the key? I’m only asking questions here, not turning tables but make of it what you wish.
A way around this problem would be to let the regular B and Bs earn the first €12000 free of tax and then tax the amount above the threshold. When I suggested this concession to the Finance Minister in the 1990s I had in mind the plight of students looking for accommodation; also the plight of the elderly whereby being able to rent a room gave them an extra income and extra security by having an extra person or two residing in the house. The crucial thing was it would cost the Government nothing because it was not something it was gaining tax from in the first place. The money generated would be spent in the economy anyway and the government would receive tax by this route. Mr. McCreevy announced the rent a room provision of up to £7500 free of tax in that Budget in one sentence.
It helped people who had already mortgages on homes, it also helped people who bought homes because it gave them some breathing space in those early years when the burden is greatest. The sad thing is that Banks and Building Societies began to include it in calculations for eligibility for mortgages which to my mind was wrong because it interfered with the choice of whether or not a person wished to rent out rooms. The Act should now be amended to specific purposes to support specific aims that might benefit society. Why not allow it to be used where a person agrees on a rent a room basis to rent rooms to a family made homeless and allow the rent be tax free up to €12000. That could solve a lot….
Anybody earning an income should be taxed on it. No exceptions.
Abbi, that’s what regular b&b’s do: offer short term accommodation to tourists and others – rural or urban. And they pay tax on the income. Why should the airbnb model be exempt from this tax? The rent-a-room €12k allowance was to try create extra room space for longer term tennants in areas where the demand was greater than the supply available.
The Bedroom Tax comes to Ireland, surprise surpise
The b&bs in places like Dingle are gouging tourists because their only alternative in the region is two very pricey hotels.A kind of cartel really.Ditto the uncanny similar price of drink in the town’s 200 odd pubs.!
The revenue saw a soft target and went for it, there motives were not to protect the student and the professional or try and alievate their housing issues. I would not be surprised if this came from the hotel lobby worried about competition in the tourist market
The hotel industry has a right to protect itself.. And all the people they employ.
“Easy target”? Some of the Airbnb hosts are making a bloody fortune. Continuous bookings from one end of the year to the other. If my vehicles weren’t taxed they would be seized at the side of the road and taken to a car pound where daily rates apply. As one of them is a commercial vehicle I wouldn’t be able to get it taxed without a valid DOE (NCT for commercial vehicles). Then I’d still have the fines to pay afterwards.
I wouldn’t begrudge someone earning a little cash on the side occasionally. But this is big business and needs to be regulated and tax compliant.
How about facing up to some competition and not try and create a closed shop cartel which is what happens when competition is curtailed. Bare in mind most of these hotels were built with 100% tax reliefs during the boom…
The alternative would be to force Airbnb to make sure it hosts have a tax clearance cert or are in fact registered for tax. It would be easy for them to do.
And they should also be making sure they have some kind of public liability insurance if people are staying there. Only a matter of time before our claiming culture finds a route to exploit this.
You’re right sp. A quick search for a random date in September brought me up 127 entire apartments/houses in Dublin city centre. This included locations like temple bar, grand canal dock and ballsbridge. These are entire properties and not spare rooms in someone’s granny’s house. It’s very doubtful that these are also a private principal residence. They appear to be properties that have been kept off the long term rental market and used for the more profitable short term market as no tax had to be paid when using airbnb.
They should insist on a VAT number and have to pass it on to the revenue.
they’re right to target them for tax, no brainer. I’d say its put a massive dent on availability of normal rental accommodation yet i’d say many move back and forth from this to long lets. a landlord wouldn’t fancy seeing a place idle.
We’re not talking about the professional landlord letting out whole apartments, they would be paying their taxes anyway. My issue is the revenue saying it doesn’t qualify for the 12k rent a room scheme.
you hit the nail on the head with that last sentence.
Intersting point but I don’t think the type of people who rent on Airbnb are the same as those who rent long term.
It’s a ridiculous comparison to say Airbnb rents are higher per night than long term rent therefore why would anyone rent to a long term tenant. Short term ANYTHING is more expensive per unit than a long term lease (cars, gym membership and of course property)
Obviously there is additional labour and more periods of vacancy in a short term rent. Theoretically in the long term the two modes of income are probably fairly similar if we believe in efficient markets.
Having the same tax base for both avoids distortions which won’t actually exist. Surely if short term was so much better why would anyone rent out a property long term currently?
However a massive difference is that many who rent on Airbnb do so out of needs must and really don’t want to. Some people will rent out a spare room and tolerate a guest 3 times a month. Some will actually move out of their own apartment for a few days and sleep on a couch elsewhere just to get some income in. Others will just be making sure their apartment isn’t lying idle when on holidays. This maximum utilisation should be encouraged as much as the apparent original purpose of the rent a room scheme cited in the article. We are not tied to the intentions of a minister from 1997.
It’s not as if providing cheaper accommodation alternatives that boosts tourism is at odds with wider government policy.
None of which means you don’t have to pay tax on Airbnb income.
I think he’s arguing that airbnb takes long term rental accommodation off the market, reducing supply and increasing prices…
All good.
All forms of income.
All taxable.
And there’s DOB can do what he likes and doesn’t pay a penny in tax.
Denis O’Brien has his gaff up on Airbnb?
THIS….. CHANGES….. EVERYTHING!!!!!!!!!
For Nazis we have Godwin’s Law. What should we call using DOB in every argument?!
C. unts Law?
This statement is on the AirBnB website.
If you do this, you may have to pay federal and state income tax on your rental income. Rental services like AirBnB ordinarily report to the IRS the rental payments they send to their hosts each year by filing IRS Form 1099-MISC.
Presumably therefore in the US AirBnB hosts are liable to tax.
It is interesting despite all the millions spent on tribunals that so many people in Ireland are still of the opinion that tax evasion is ok and should even be encouraged.
It’s the Irish way unfortunately. Only others should pay.
Program is the American spelling. In Ireland it’s programme. This spelling revisionism really bugs me.
RIP AirBnB
In Ireland anyway. I use it when I go to NY….great service
I can’t believe it, this fellow has written a sensible article.
Can’t have it both ways… How many students and young people are rejoicing with all the extra weekends away and beer money saved from sharing a place on AirBnb vs. Hostels and hotels rooms.
And how many have found well paying jobs out of it down in silicon docks…
Once more this kind of stickling plaster ‘tax relief’ to cover the massive underlying problem of supplying proper affordable social housing (instead of massive pay and perks for politicians) is once more creating wider problems that it sets out to achieve in relief. I dare say the tax relief idea was moreover introduced to help middle Ireland pay for mortgages and of course get the banks of the hook than deal with any social issue.
Until money is diverted from paying for the ‘Euro Project; and re-invested in our own society, we will always be destined to rely on the old back room to get by; and of course be in bondage to the few Councillors and Politicians who queer the market to keep them and their families in the business of renting their properties.
http://www.independent.ie/business/irish/revenue-will-not-look-to-prosecute-airbnb-hosts-who-didnt-pay-tax-31450726.html
Seriously Aaron, do you read the news and take cognosense of what is actually happening? Or do you just run with an idea? I’m sure a lot of people that do rent out rooms using the airbnb site were initially worried because they wish to stay tax compliant but they are not the ones that revenue want. It’s business people with property who let out lots of rooms that most interest them. Look at it this way and this is hypothetical, if one owns a house in Dublin near a university that one converted into 7 bedrooms with each one able to take 3 beds. Charge people €10 a night so able to earn €210 per night that’s comes to over €6000 per month. The people renting can study in the college so really all they need is a place to sleep. For the most part one could have a property like this and declare that you were receiving a rent of €2000 per month and revenue really wouldn’t be any that wiser now, would they? Airbnb have a statutory duty to report who rents what on their site and that’s not a bad thing but like the article link I’ve provided they really aren’t chasing the small guys. So I think it’s business people that have the ‘attitude problem’ and the small guy is just worried about being prosecuted for paltry amounts of money.
I don’t understand your point. What you suggest is tax evasion which is illegal.
Yes it’s illegal, that’s exactly what I’m suggesting. I’m suggesting that this sort of activity takes place at this moment in our capital city and I think that revenue can use details from sites such as Airbnb to catch the evaders. The articles headline and opening paragraphs are quite condescending to ordainary people who are generally tax compliant. If one rented one room out and it’s as a b & b then you would need to be registered for vat surely? Because the vat rate is 9% which shows that they enjoy an advantage over Airbnb who will pay service vat at least. Even if that’s not the case you could claim the cost of food provided for your guest, cost of fittings/ divided by the write down no. of years, cost of refurbishment divided by same, cleaning costs, you might pick them up in your car so travel expenses. I haven’t read the legislation but Ernest Young have apparently and they disagree with revenue on the matter which is unusual. I am also suggesting that it’s people who are in business that are more likely to evade tax in respect of short term lettings than solo operators. And at the start of the post I posed a question where I wondered if the author had read the news which was a bit tongue in cheek. I hope that makes it a bit clearer.
People should be happy! Revenue have totally made a mess of this. If you rent a room for one night to someone via AirBNB you then qualify for tax credits AND you can totally have the room painted, carpets, new furniture, etc. and write it all off as well. Once its done you can move your master bedroom into your newly done up spare room and then do up your master bedroom and also write it off too sure. So the government might get a few bob for the single night you rent a room, but you will end up making the government foot the costs of redoing your bedrooms plus get a big tax credit as well. It doesn’t seem that they thought this through too well as they seem to want to treat everyone equally, and by doing so it means people who use AirBNB for a single night a year renting out a room will be able to claim back just as much as a person who runs a proper BNB.
What?? They don’t just give you money. You can only claim the costs back against the income from air bnb rentals. One night will not cover redoing your house…..
As a person with rental property you can write off costs associated with maintaining that property. Don’t believe me? Google it or read up on the Revenue website…
http://www.revenue.ie/en/tax/it/leaflets/it70.html
Look at expenditures and what you can write off. Also forgot to mention you can write off a portion of your mortgage along with a portion of your electricity, Sky, and any other bills which are ‘shared’.
Knew by the title it was by Aaron, so won’t be reading it.
good boy.
You were right to avoud the article. Here’s why.
You should read things by people you don’t always agree with from time to time. You might learn something!
Author defends partition , alleged paedophiles and now taxing low incomes. Great guy.
That level of Supply and demand has very little to do with rent prices at the moment. Honest rent a room. Air BnB hosts would more than lightly never have a full time tenant. The 300 vs 936 figure is ridiculous and fabricated to suit your figures Aaron. 12 k is too high a limit. But if Air BnB hosts were given tax breaks up to 4-5k I imagine the economic benefits on tourism and spending would be positive !! And it would eliminate both the big money spinners and largely the direct competition to hotels , who we know are a big part behind this push. I would agree live in BnB’s should prob also get this break. But over all your argument is just twisted to suit your opinion. There’s much better arguments for it.
The main agency Irish Landlords are using to let their property abroad is http://www.homeoweners.co.uk, as it produces far better results than Airbnb
Well I don’t think he covered all angles!! A BnB allows people to do occasional lets and still have room for friends and so on really not comparing like with like!!!
… Continued from my last post.
The condition would be that the rent a room in the context of housing homeless families would be allowed to include the Council payment tax free. Accommodating families in this way might not appeal to all but might appeal to sufficient to make it a viable possibility. Also hostels, BnBs, bean an tís in Gaeltacht areas should be able to avail of the scheme up to €12000. A proportion of the money gained will always return to the government by way of taxes associated with spending and the local economy will have a benefit. The scheme could also be used to help house asylum seekers in the more normal surroundings of a regular house rather than warehousing them in hotels and a disused holiday camp. It would help the asylum seekers feel more integrated.
If Fr. McVerry takes a look at what I have written here, it might provide a route to help, homeless people break the cycle of homelessness, by having a real home setting. I know specific conditions should be attached around alcoholism, drug taking, anti social behaviour etc. this solution would potentially cost the Government a lot less than they are spending at the moment. In order to balance things a bit owners who rent a room should not be able to avail of the Section 50 and Section 27 concessions simultaneously. Relief on improvements in the rent a room context should only be offset against rent a room income in excess of €12000 for tax purposes.
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