AirBNB is a platform via which you can rent out the house that is your main residence during the period you do not use the house. For instance during your holiday. Is that income taxed?
AirBNB income taxed
The income earned with AirBNB is subject to Dutch income tax if you own the house you rented out. If you do not own the house, but you rent yourself, we doubt you can put the rental on AirBNB, as the landlord most likely does not give permission to sub rent the house due to all kind of rules and regulations.
Hence we assume you own the house you are putting up for AirBNB. In the Dutch income tax return you find that the house is in Box 1 as the house is seen as a source of income. As you most likely took out a mortgage to purchase the house, part of the source of income is that you can deduct the costs related to this source of income. That is how you get tax back for the mortgage interest.
For us tax advisors is it logic that when the house is in Box 1 explicitly being a source of income, the income generated with AirBNB is part of the taxable income. That is also the logic of the Dutch tax office, hence you are obliged to report 100% of your AirBNB income and then 70% of this income is taxed in Box 1. This certainly spoils your short lived enjoyment of the income, but that are the rules of the game.
Or are they?
AirBNB income taxed or not?
In a court case for the higher court, the garden house was yielding EUR 3500 annual AirBNB income and the tax office was charging over 70% of this income, Box 1 income tax over the past five years this income was not being reported.
The court stated that the garden house was not the main residence of the tax payer, hence the AirBNB income should not be taxed in the progressive tax rate maxed at 52% but in the Box 3 wealth tax box with a tax rate of about 1.2%.
Your initial thought might be of enjoyment, but is this enjoyment? We think not. The garden with the garden house is part of the plot you purchased with the house for which you secured a mortgage.
The interest related to this mortgage is fully deductible in Box 1. However, as now the court has ruled that the garden house is not part of the main residence of the house, the garden is not part of the main residence.
As only the financial costs of the loan taken out for the main residence are tax deductible, this outcome implies the pro rata part related to the garden is no longer tax deductible.
Example.
- You purchased a 200 square meter house with a 200 square meter garden for EUR 800.000.
- The mortgage is for EUR 800.000 at 2% being EUR 16.000 interest costs per year.
- EUR 6.000 of these interest costs you cannot deduct due to the WOZ up count.
- We assume you are in the 52% tax bracket, max 49% is tax deductible
In the income tax return the EUR 16.000 mortgage interest is a tax deduction that is compensated by the WOZ value for EUR 6.000, hence EUR 10.000 is deductible at 49% is a EUR 4.900 refund.
The garden house yielding EUR 3500 for which you paid 52% tax over 70% of this income in the income tax return is EUR 1.274 tax paid for the AirBNB income.
But now the court stated that this is not part of the source of income. As the garden is 50% of the total, we make a simple assumption 50% of the EUR 16.000 mortgage interest you no longer can deduct. The WOZ up count will be less as well, let us assume that also reduces with 50% to EUR 3.000.
Using the outcome of the court case the AirBnB income of the Garden house is as follows. The actual income of EUR 3.500 we disregard. Taxed is the value of the garden, EUR 400.000, minus the debt related to the garden, EUR 400.000, is zero. Hence zero income tax is due over the AirBnB income.
Then pro rata the mortgage deduction no longer applicable. That implies EUR 8.000 mortgage deduction limited by EUR 3.000 WOZ value is a EUR 5.000 deduction at 49% being EUR 2.450 tax refund.
The court case made the AirBnB income tax free and your tax refund reduced from EUR 4.900 to EUR 2.450. In other words, to avoid paying EUR 1.274 tax over the AirBnB income, you now get EUR 2.450 less tax back.
AirBNB and the Dutch tax office
The Dutch tax office might have appealed the outcome or embraced the outcome. The European Union instructed the Dutch Government to terminate the subsidy on housing via the mortgage refund. That is the reason why the deductible percentage is this year 49% instead of 52% and next year 46%.
If people then rent out a part of the house/garden and it is decided that this part of the house/garden is not part of the main residence, the tax deduction is significantly less, which the Dutch tax office will favour. Hence we doubt the tax office will appeal the outcome as basically they have won.
Orange Tax Services
AirBnB income is for us a tricky subject, the moment we explain that over 70% of the income the progressive tax rate (often 52% tax) is due, we hear through the phone already that we are crashing the party. Then suddenly the income was not so high, and no income was earned over previous years.
That is the moment it becomes tricky for us, as we , Registered Tax advisors, need to file a correct income tax return. Not an income tax return where a bit of the AirBNB income is included.
Regardless of this extra source of income, our fee to file remains fixed at EUR 390 incl VAT including tax partner.
