# AirBNB as only source of income



## bmount (30 May 2016)

We are looking closely at financial plans for the next 5 to 10 years and my wife may be stopping regular fulltime work in a few months time depending on the outcome and would like to assess this option for income.

We have a 1 bedroom property in "silicon docks" area of Dublin that has not had any renting problems for the last 20 years since we bought it, has huge rental demand, and I feel we could occupy it for 200 bed nights out of 365 at 200 euro per night using Airbnb.     

Thats 40k income approx. for airbnb hosting which would almost replace her job without the normal working stresses   (salary in the 50s).

Its currently rented at 1400 thats 16,800 per year and only for we select reliable tenants for 4 years at a time we could probably get 1600 etc if we were greedy
(I know we can claim mortgage interest and management fees against the normal rental scenario whereas I understand these are not allowable with airbnb taxation)

So if my wife becomes a "fulltime" "Airbnb host", it would be her only source of income and therefore the question is does the 20% Standard Rate cutoff may apply, up to c. €33800 ? This is the question as if thats the case it may be worth doing this but not at 40% income tax. 
So the tax take might be 9k out of 40k or something like that rather than 18k.

Do we have to setup a limited company for this ? and "employ" my wife ?

We have significant cost of living at this chapter in our lives as in other thread about the desire to mortgage switch our primary residence and this is part of the process (from a lifestyle perspective as well of course)


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## bmount (30 May 2016)

of course I stupidly forgot the mortgage cost of 600 per month plus 100 manageent company per month.

So probably would target 45k to make it work well.


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## Joe_90 (30 May 2016)

What do you mean interest and management fees are not allowed for taxation??


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## jim (31 May 2016)

What do you think he means joes! Presumably he is questioning whether he can deduct those from revenue for calculating taxable profits.


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## Joe_90 (31 May 2016)

Ok let me rephrase that.

OP where did you hear that interest and management charges were not tax deductible?

It would be of Benefit to know so that I can figure out where people are getting their tax advice from.

It's a case one trade so interest on the property and management changes on the property would be allowed.

At 40,000 turnover you need to consider the VAT implications.


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## bmount (31 May 2016)

There are several other discussions over the internet, various tax sites, that Airbnb income is considered trading income
due to its short term let nature and it does NOT fall under either 

i) regular long term renting where the mortgage interest is allowable.
nor
ii) as part of the 12k tax free "Rent a Room" which some people are trying this out with.

So therefore it looks like you need to just declare it as part of a business perhaps
which leads me to think we have to set up a company and make my wife an employee (preferably with first 33k at 20% only).

I don't have the answer. However, I'm not keen on getting into VAT payments that might kill 
the whole idea altogether.

Thanks.


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## bmount (31 May 2016)

Example http://assets.airbnb.com/eyguidance/ie.pdf


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## cloughy (31 May 2016)

and if you set-up a company, then I assume you would have to sell the property to the company, it take over the loan, as not sure you could claim that the company was entitled to the rent when it doesn't own the asset. I can see a lot of tax implications on the company route, both getting the asset into the company (you could sell the asset to company and have it as a amount owed to you), but you can't do this without the banks say so I would assume, then will you realise a gain on transfer to Company as would have to be at market value, if not then you have a loss that you could use else where, but getting the asset back out of the company could incur double tax, or a tax charge if it was transferred back to you at the same price as you originally bought it at.

Think you would need specialist help in how best to structure this to allow you to use the unused tax free allowances at the lower rate against the gross rent.


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## bmount (31 May 2016)

you could be right mortgage interest might be allowable, I would like to read more on this....


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## T McGibney (31 May 2016)

bmount said:


> There are several other discussions over the internet, various tax sites, that Airbnb income is considered trading income
> due to its short term let nature and it does NOT fall under either
> 
> i) regular long term renting where the mortgage interest is allowable.



Mortgage interest on a premises used for business purposes is routinely deductible against trading income for tax purposes. If you are seriously considering this idea you need comprehensive professional tax advice on all the tax issues arising including that of VAT. Some of the "advice" here is a mile off.


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## bmount (31 May 2016)

Thanks for the company asset analysis, I wouldn't plan on anything complicated like that or involving solicitors or banks.

Enrst Young : "In addition, in order to claim a deduction for mortgage interest, the host must ensure they are compliant with the requirements of the Residential Tenancies Act in relation to the registration of a tenancy with the Private Residential Tenancies Board (‘PRTB’). The PRTB registration fee itself is also a deductible expense."

This is not realistic with 3 tenants per week at 90 euro per registration so I don't think mortgage interest
in our case is worth worrying about as its around 75% 100 per month as we are on a Tracker with around 110k remaining.

Need a simple way to get the maximum at the 20% employee tax rate up to 33k.


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## T McGibney (31 May 2016)

cloughy said:


> and if you set-up a company, then I assume you would have to sell the property to the company, it take over the loan, as not sure you could claim that the company was entitled to the rent when it doesn't own the asset.



Sorry this is garbage. If you don't know the answer, please don't post and potentially mislead someone.


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## T McGibney (31 May 2016)

bmount said:


> Thanks for the company asset analysis, I wouldn't plan on anything complicated like that or involving solicitors or banks.
> 
> Enrst Young : "In addition, in order to claim a deduction for mortgage interest, the host must ensure they are compliant with the requirements of the Residential Tenancies Act in relation to the registration of a tenancy with the Private Residential Tenancies Board (‘PRTB’). The PRTB registration fee itself is also a deductible expense."
> 
> ...



The RTA doesn't apply to short term Airbnb-type lettings.


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## bmount (31 May 2016)

ok thanks for eliminating what seems complexity T McGibney. And yes that paragraph does look garbage about the RTA.

If anyone can see how to get 33k @20% without any solicitor or bank involvement or complexity please let me know.
I am willing to set up some sort of company with an accountant be it sole trader or ltd. but thats it.
Concerned about VAT alright - again thats not ideal.


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## T McGibney (31 May 2016)

It's not at all complex but unless you get proper specific advice you risk overlooking something that will scupper the entire venture. Good luck with it.


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## cloughy (31 May 2016)

Re TmcGibney,

a question was asked -
Do we have to setup a limited company for this ? and "employ" my wife ?
so if he wanted to set-up a company and divert the rental income to that Company, and that company employ his wife, how could it be done 

I don't think I was mis-leading anyone, as I did say that specialist advice was required as a lot to consider.


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## cremeegg (31 May 2016)

bmount said:


> Enrst Young : "In addition, in order to claim a deduction for mortgage interest, the host must ensure they are compliant with the requirements of the Residential Tenancies Act in relation to the registration of a tenancy with the Private Residential Tenancies Board (‘PRTB’). The PRTB registration fee itself is also a deductible expense."



If this really is a quote from EY and they are referring to Airbnb type hosting then its not just on AAM you can get bad advice.

The above is simply WRONG.

Airbnb hosts are in the same business as a guest house and do not have to register tenancies with the RTB.

Interest is deductible in full as an expense against income of this type.

But hey you should always take professional advice.

Setting up a company in the situation would make absolutely no sense. It would involve costs and obligations and confer no benefit. Forget that.

If the turnover exceeds the VAT threshold then you would have to register for VAT. That would be a complete no no in this situation. As the VAT limit is just below the expected turnover I suggest that you simply close down for a few weeks to keep the turnover below the limit.

Your wife will be taxed on the PROFITS of the business not the gross income, depending on her tax credits situation she would probably pay little or no tax at the higher rate.


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## bmount (31 May 2016)

Thanks a lot cremeegg. 

Ok so don't setup a company and try mind the VAT threshold
If you don't mind me asking for a clarification on your last point.....

If my wife is taxed on the profits as you say (lets say 35k) and she has no other income as per the title of this discussion, will
she get the first x thousand at 20% rate ? As if its 40% on all the profits surely its a non starter......
and is she "employed" or will we just be filling out a Form 12 tax return for her/for this business (the following year) ?

thanks again.

As an aside there's obviously a joint mortgage on the property, maybe ownership doesnt matter


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## T McGibney (31 May 2016)

cloughy said:


> Re TmcGibney,
> 
> a question was asked -
> Do we have to setup a limited company for this ? and "employ" my wife ?
> ...




I appreciate that but my point was more about the idea of having to sell the property to a company as a pre-requisite for that company to run an Airbnb business from the property. Which is all kinda moot now anyway.


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## cremeegg (31 May 2016)

bmount said:


> If my wife is taxed on the profits as you say (lets say 35k) and she has no other income as per the title of this discussion, will
> she get the first x thousand at 20% rate ? As if its 40% on all the profits surely its a non starter......



Yes up to her basic rate allowance will be taxed at 20%, with the remainder taxed at 40%. You can find what her basic rate allowance is on her cert of tax credits. The tax is reduced by any tax credits she is entitled to, probably just the personal tax credit.





bmount said:


> and is she "employed" or will we just be filling out a Form 12 tax return for her/for this business (the following year) ?



She will be self employed and will probably have to fill out a Form 11, similar to a form 12, with more detail.



bmount said:


> As an aside there's obviously a joint mortgage on the property, maybe ownership doesnt matter



If you do a joint tax return I don't think it would matter, but am not sure on that point.


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## bmount (1 Jun 2016)

Thank you to all replies and cremeegg yes thats mainly what I wanted to know I think.

So Self employed with Form 11 and can avail of the lower tax rate (like anyone else with only source of income)
and no company required or property transfer.

That just leaves the VAT side of it which I hope is not a factor, need to look up guidelines on that   (I don't see VAT charged on airbnb...)


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## cremeegg (2 Jun 2016)

Most Airbnb hosts don't have to charge VAT because their turnover is below the threshold.

If you register for VAT ( you must if you expect your turnover to exceed the threshold) you have to charge VAT on the letting. So €200 becomes €200 plus VAT, €218. However in practice if the going rate is €200 you won't be able to charge €218, so your charge becomes €183 plus VAT €200. 

Actually this is an excellent advantage for a small operator versus the larger hotel guest house.


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## odyssey06 (3 Jun 2016)

Be aware that you may need planning permission to change use of the property in this manner according to DCC:
http://www.independent.ie/business/...tment-made-79000-through-airbnb-34769131.html


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## bmount (3 Jun 2016)

Thanks cremeegg again.

Wow odyssey06 that is fresh news this morning and bad news ! many thanks, I will need to inform my potential accountant on this immediately. Bummer !


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## Sarenco (3 Jun 2016)

odyssey06 said:


> Be aware that you may need planning permission to change use of the property in this manner according to DCC:
> http://www.independent.ie/business/...tment-made-79000-through-airbnb-34769131.html



Interesting development. 

In addition to the planning issue, wouldn't the head lease of most apartment developments prohibit this sort of use?  Also, I wonder would it potentially impact the block insurance policy?

I have mixed views on the issue.  On the one hand, I suppose the availability of Airbnb lets facilitates tourism but I can certainly understand why a long-term resident might be upset if the apartment next door was let to stag/hen parties every other weekend! 

Like a lot of the "share economy", I suppose its an area that probably does need some form of regulation.


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