1. Why the tax label matters

Short-term letting in Ireland has grown quickly. Professional landlords and second-home owners are now asking a simple question: how is this income taxed, and is there a better way to structure it?

The answer depends on which "bucket" your income falls into:

• Case V (rental income): passive letting of property. Limited expense deductions. Mortgage interest only deductible if registered with the RTB.
• Case I (trading income): running a short-term letting business. Broader expense deductions. Earned income tax credit available. Losses can offset other income.
• Company profits: 12.5% corporation tax if genuinely trading. 25% on passive rental income.

The difference between 12.5% and 52% on the same income is not academic. Getting the classification right, and structuring accordingly, can be worth tens of thousands per year. But Revenue decides the classification based on the facts, not your preference. Getting it wrong can trigger penalties and back-tax.

2. Rental income (Case V)

If you let a residential property on a standard long-term basis, your income is taxed as rental income under Case V of Schedule D (Section 75, TCA 1997).

2.1 How it is calculated

Start with gross rent received in the year. Deduct allowable expenses. The net profit is taxed at your marginal income tax rate (20% or 40%), plus USC and PRSI. The effective marginal rate can reach 52% (40% income tax + 8% USC + 4% PRSI).

2.2 Allowable expenses under Case V

Expenses are restricted to those listed in Section 97(2) TCA 1997:

• Repairs and maintenance (not improvements).
• Insurance.
• Management fees and letting agent fees.
• Accountancy fees for rental accounts.
• Legal fees for lease agreements.
• Advertising for tenants.
• Wear and tear on furniture and fittings (12.5% straight-line over 8 years).

2.3 Mortgage interest

100% of mortgage interest is deductible against rental income, but only if the property is registered with the RTB (Residential Tenancies Board). This is critical for short-term let hosts: if your property is a short-term tourist let and not registered with the RTB (because it is not a standard residential tenancy), Revenue may deny the mortgage interest deduction under Case V.

A temporary additional 20% income tax credit for landlords was introduced in 2024 for the years 2024 to 2027 (Section 473C TCA 1997), applying to Case V rental income only.

2.4 Losses

Case V losses can only be carried forward against future rental income. They cannot be offset against other income (salary, dividends, etc.).

3. Trading income (Case I)

Where the host provides significant additional services beyond accommodation, Revenue may treat the income as trading income under Case I of Schedule D (Section 18, TCA 1997).

3.1 What makes it a trade

Revenue applies a "badges of trade" analysis. Factors that push toward Case I:

• Short-term lets (nights or weeks, not months).
• Frequent guest turnover.
• Services provided: cleaning between guests, fresh linen, toiletries, welcome packs.
• Active management: pricing strategy, review management, guest communication.
• Listed on OTAs (Airbnb, Booking.com) as holiday accommodation.
• Multiple properties under management.

There is no statutory threshold (for example, "X nights = trading"). It is a facts-and-circumstances test based on Revenue guidance (TDM Part 04-01-01).

3.2 Allowable expenses under Case I

Trading expenses are broader than Case V. Under Section 81 TCA 1997, you can deduct:

• Everything listed under Case V, plus:
• Cleaning and laundry costs.
• Toiletries and welcome packs.
• Platform commission fees (Airbnb service fee).
• Staff wages.
• Telephone and broadband.
• Professional photography and website costs.
• Motor expenses (proportionate, for property visits).
• Capital allowances on fixtures, fittings, and equipment (12.5% over 8 years).

3.3 Advantages of Case I

• Earned Income Tax Credit (€1,875 in 2025) available to self-employed traders.
• Loss relief: trading losses can be offset against other income under Section 381 TCA 1997.
• Mortgage interest deductible under normal trading rules without the RTB registration requirement.

4. How Revenue decides which applies to your Airbnb

Revenue does not let you choose. The classification is based on the reality of what you do, not what you call it on your tax return.

4.1 The grey area

A single property let on Airbnb with professional cleaning and linen changes sits in the grey area between Case V and Case I. Revenue's position is that if the activity goes beyond passive letting and involves "the provision of goods and services to an extent which would make the activity a trade," it is Case I.

In practice, most hosts with one or two properties who use Airbnb casually are treated as Case V. Hosts who operate multiple properties with professional management, pricing tools, and regular services are more likely to be Case I.

4.2 The "other income" trap

Revenue has also indicated that some short-term let income may fall into neither Case V nor Case I. Where guests receive a licence to occupy rather than a tenancy, and the activity is not extensive enough to constitute a trade, the income may be treated as "other income" under Case IV. This comes with even more limited expense relief than Case V.

4.3 Platform reporting (DAC7)

Since January 2023, Airbnb, Booking.com, and Vrbo are required to report host income directly to Revenue under DAC7. Revenue receives your name, PPS number, total income, number of lettings, and property addresses. There is no room for underreporting. The gross amount on your platform statement (before the platform fee) is the taxable figure.

5. Rent-a-Room Relief

If you let a room in your own home, Rent-a-Room Relief (Section 216A TCA 1997) is the simplest route.

5.1 How it works

Income up to €14,000 per year from renting a room (or rooms) in your principal private residence is exempt from income tax, USC, and PRSI. This includes Airbnb income from a spare room.

The threshold was increased from €10,000 to €14,000 in Budget 2024.

5.2 Key conditions

• Must be your sole or main residence. You must live there.
• The room must be part of your home, not a separate self-contained unit (though Finance Act 2019 extended it to include a self-contained unit within the curtilage of the home, subject to conditions).
• Applies to lodgers, students, and short-term Airbnb guests.
• You must elect for the relief on your tax return.

5.3 The cliff edge

If your income exceeds €14,000, the entire amount is taxable, not just the excess. There is no taper. Stay under the threshold or claim expenses in the normal way.

5.4 No expenses if you claim

If you claim Rent-a-Room Relief, you cannot also deduct expenses against the income. It is one or the other. For most spare-room hosts earning under €14,000, the exemption is better than claiming expenses.

6. Company structures

Running short-term accommodation through an Irish company is common among professional landlords. The tax treatment depends on whether the company is genuinely trading.

6.1 Trading vs passive

• Genuine trading profits: taxed at 12.5% corporation tax.
• Passive rental income: taxed at 25% corporation tax.

The same badges-of-trade analysis applies. A company that manages multiple properties, employs staff, and provides services to guests is more likely to qualify for the 12.5% rate. A company that simply holds one property and collects rent is passive.

6.2 A rough comparison

On €30,000 profit from one property (ignoring USC, PRSI, credits, and surcharges):

• Individual at 40%: approximately €12,000 income tax.
• Company at 12.5% (trading): approximately €3,750 corporation tax.
• Company at 25% (passive): approximately €7,500 corporation tax.

The company route looks attractive, but extracting profits as salary or dividends triggers additional personal tax. Company structures also carry accountancy, audit, and compliance costs. Get professional advice before restructuring.

6.3 Vacant Homes Tax

If a property is vacant and not let, the owner faces Vacant Homes Tax at 5x the Local Property Tax rate (from 2024). This is a significant cost for properties sitting empty. It pushes owners toward either letting or selling.

7. Planning permission and Rent Pressure Zones

Tax is only half the picture. In much of Ireland, short-term letting also requires planning permission.

7.1 The RPZ rules

Under SI No. 228 of 2019, properties in Rent Pressure Zones face strict rules:

• If the property is not your principal private residence, you need planning permission for any short-term letting (stays under 14 nights).
• If it is your principal private residence, you can let for up to 90 days per year while you are away, without planning permission.
• Renting a room in your PPR while you live there is not caught by these rules.

7.2 Dublin is almost entirely in RPZs

All four Dublin local authority areas (Dublin City, Dun Laoghaire-Rathdown, Fingal, South Dublin) are designated RPZs. If you own an investment property in Dublin and want to use it for Airbnb, you need planning permission. Dublin City Council has an active enforcement unit. For more on Dublin-specific rules, see our guide to short-term letting rules in Dublin.

7.3 Failte Ireland registration

Properties offered as short-term tourist accommodation must register with Failte Ireland under the Tourist Traffic Acts. The EU has also adopted Regulation 2024/1028 requiring member states to establish STR registration schemes, which Ireland is expected to transpose by 2026.

8. What is changing

8.1 Platform reporting is live

DAC7 reporting has been in effect since January 2023. Revenue now receives detailed income data for every host on Airbnb, Booking.com, and Vrbo. Cross-referencing with tax returns is automated. If you have not been declaring platform income, expect contact from Revenue.

8.2 EU registration regulation

EU Regulation 2024/1028 requires member states to create national registration schemes for short-term rental properties. Ireland is expected to transpose this by 2026, which would create a formal register of all STR properties and strengthen enforcement of both tax and planning rules.

8.3 Mortgage interest credit

The temporary 20% income tax credit for landlords (Section 473C TCA 1997) runs from 2024 to 2027. This applies to Case V rental income and is designed to keep landlords in the market. Check whether it has been extended beyond 2027 in the latest Finance Act.

8.4 Questions to ask your adviser

• Is my current income treated as Case V, Case IV, or Case I?
• If I move into short-term lets, how is that likely to be classified?
• Would a company structure reduce my effective tax rate, after accounting for extraction costs?
• Am I claiming all allowable expenses for my classification?
• Do I need planning permission for my property's location?
• Am I registered with the RTB (for mortgage interest deduction) and Failte Ireland?

The right structure depends on your property count, income level, and whether you provide services. A tax adviser who understands Irish short-let property is essential. For more on what professional management costs, see our guide to property management fees.