Tax Deductible

[DizneyDreamer]

I heard that on this board that our DVC "mortgage" may be tax deductible. Is this true? That would be awesome..but I am not getting my hopes up.

[spruce]

Yes, if the loan you take out is a mortgage as opposed to any other consumer loan, then the mortgage interest is tax deductable as a second home or vacation home deduction...spruce

[KNWVIKING]

Also, the portion of your annual dues that represents the property tax you pay is deductible. I think for OKW, tax year 2000 it was 0.69 per point.

[DVCDAVE]

All this asumes you itemize on your tax returns, and that you qualify to take the deduction as a second home. Check with your tax advisor first.

[mickey1010]

A slight stretch, but legal, you can deduct expenses for one trip per year to "check up and maintain" your property. We have used this for the last two years, it helps out a little. Just keep your airfare & rental car receipts.

[Doctor P]

I would really question any tax adviser that suggested the "check and maintain" trip would apply to a property like DVC--indeed, you would not be allowed to do any "maintenance" on the property. There is such a thing as being aggressive and such a thing as bordering on fradulent. This borders on the latter since you must be "working substantially full time repairing and maintaining your property" for even a DAY to count as maintenance and repair.

[ripleysmom]

DizneyDreamer, if you financed through Disney then this is a mortgage and the interest is tax-deductible, as well as the real estate tax portion of the annual maintenance fees.

[dwg]

Micky1010,

I would like to know what Internal Revenue Code Section you are basing your advice on.

I assume you are referring to deductions allowed to maintain an income producing property. If so, these deductions are allowed as miscellaneous deductions subject to a limitation of 2% of adjusted gross income. Further more any expense related to your spouse or children or the vacation would absolutely not be allowed. So any deduction would be minimal at best.

Since DVC is not an income producing property and the purpose of visiting is for vacation, there are no deductions allowed. And I can guarantee you that the cost involved to you should the deduction be disallowed including tax, penalties and interest would far out way any benefit that you might have derived from taking the deduction.

[Doctor P]

...not to mention the restrictions on using DVC for commercial purposes.

[Disnydad]

Our CPA just laughed when I called him on this "one trip deduction" to DVC. He said that it would be one of the first things tossed out at an audit. Now if we owned a house down there that we rented out, that would be different. But a timeshare, no way.

[Doctor P]

Yep, Disnydad, that would be the reaction I would expect most CPA's to have on this one!;) This tend to be one of the abused parts of the tax code and one that they seem to keep an eye on in my experience.

[Jaypd]

The answer is a yes and no...You can deduct a time share if you use it more then 14 days per year. So if you have enough points to stay 14 days. Does not have to be in a row. Then yes you have a write off. This info came right from the IRS.....Instead of hoping I was getting the right info I called. :)

[Doctor P]

Sorry, JayPD, but the IRS has not given you a correct answer (perhaps the question was not phrased correctly or fully) and I am extremely confident in this. There are a series of conditions that must be met in order to deduct expenses associated with any renatl properties, and you lose the mortgage interest deduction on schedule A when you do this. The questions and issues are too complex to discuss on this board, but I stand by the friendly advice that one should not attempt to deduct "maintenance" trips to DVC. This abuse would be very easy to discern in a review of a tax return and very easy to challenge in an audit procedure.

The mortgage interest deduction has nothing to do with the 14 day rule.

[Disnydad]

Ah JayPD but, studies by the Congressional Budget Office have shown that the IRS info lines give out wrong information about 50% of the time.

When we had our boat, we were told the 14 day rule had been dropped. The boat is gone now, so we will be deducting the interest and property tax for our DVC.

[Jaypd]

I am humble enough to say I am wrong. Lets hope I don't get audited that is when I will find out how wrong I was :) :)

Now just so you now I never once asked about maintenance" trips. I simply asked what the rule was when it came to a timeshare and I was told the 14 day rule.

[dwg]

The 14 day rule is a test to determine if you are using a rental property also as your home. If you are using the property the greater of 14 days or 10% of the total days it is rented to others at a fair price then the property was used as your home.

In any case we are still talking about income producing property, which DVC is not.

In regards to the IRS, yes they do sometimes give incorrect answeres but to be fair to the IRS sometimes the questions are asked in a way that will cause an answer to be incorrect or incomplete. Answers can only be based on the facts given.

[tax58]

I have to agree with Doctor P on this one. The IRS would throw out the maintenance trip expenses in a second. But a lot of people still get away with taking the expense, because the IRS can’t catch everyone.

[spruce]

What portion is deductalbe if you attend the annual DVC meeting if any? And, We're going down next summer to Fla for a month(not all DVC). While my wife and son play, I intend to work. There will be some business expense deductions there(which isn't what we are talking about here) but a write-off anyway.. Oh, and how about thse folks that set up their DVC as a corporate owner and have their annual meeting at their resort?...spruce