ELI5: AirBnB and tax

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Forums › Finance and wealth management › ELI5: AirBnB and tax

cddt

1965 posts

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#319402 22-Apr-2025 07:14

We would like to start doing AirBNB with the granny flat attached to our house.

Everything is set up and ready to go, but one thing which has stumped me is how the income tax situation works.

I've read all the information on the IRD's website but as someone who just does PAYE every year, it assumes some prerequisite knowledge I just don't have.

Now on to the specific questions:

Is it really as simple as just filling out the IR3R form?
There are two people who own the property, do we split the income and expenses 50-50 across two forms?
The form talks about depreciation, is this something we need to consider? If so, how? Buildings vs assets?

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gcorgnet

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#3366435 22-Apr-2025 08:11

Hi, I'm doing exactly what you're wanting to do.

Is it really as simple as just filling out the IR3R form?
- Yes, declaring everything AirBnB gives you as income, and with the ability to deduct some of your expenses
There are two people who own the property, do we split the income and expenses 50-50 across two forms?
- Yes, that's correct. You may even be taxed at different rates for each half if both owners are on different tax rates.
The form talks about depreciation, is this something we need to consider? If so, how? Buildings vs assets?
- Sorry, I haven't dealt with depreciation in this case. In terms of what I've expenses:
  - Direct expenses 100% attributable to the AirBnB activity (eg: You're buyiung linen only used for the guests)
  - A portion of your Rates/Mortgage Interests/Power Bill/Water Bill which is calculated based on m2 area of the granny flat compared to total 2 area (pro-rate).
  - Note: You must also pro rate this across the year if the flat is not rented or available 100% of the time. (eg: If for 2 months a year you have family visiting, you can only claim the above for 10 out of 12 months every year, which is roughly 83%)

This is what I used when dong my return last year: IRD

cddt

1965 posts

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#3366630 23-Apr-2025 06:22

That's really helpful, thanks!

Do you know if we can allocate all the income and expenses to the taxpayer on the lower tax rate? I am aware we cannot use the expenses to offset other income.

How do you evidence "available to rent"? I.e. you have it listed on AirBnB but no one books it, to my understanding this is time which can be claimed for.

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gcorgnet

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#3366655 23-Apr-2025 08:36

Forgot the usual disclaimer: I am neither an accountant nor a financial adviser and the advice above and below is taken from my own experience.

cddt:

Do you know if we can allocate all the income and expenses to the taxpayer on the lower tax rate? I am aware we cannot use the expenses to offset other income.

I have assumed not (given the property is co-owned) and split the income between my wife and I, even though we're not on the same tax rate.

cddt:

How do you evidence "available to rent"? I.e. you have it listed on AirBnB but no one books it, to my understanding this is time which can be claimed for.

This would be covered under point 9 here. I'm personally not sure what they mean by "You’ll also need to keep records to show it was available to rent and not used privately at all during this time.".
I don't think Airbnb keeps accurate records of whether something was available or not.
Airbnb does let you see past calendars, making it clear whether something was booked, blocked (the day number is crossed out) or free so maybe that's enough?

Asteros

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#3366661 23-Apr-2025 09:04

OT It is very important that you check with your council regarding the local rates for an AirB&B property. Many others have been caught out with a nasty surprise.