Any tax implications for renting points?

[izzy]

Calling all tax experts! Does anyone know if there are any tax implications if you rent points? Do you have to record it as income on your 1040?

 

[dianeschlicht]

It is income, so probably. I think there is a line about how much and how often that makes it reportable. In other words, it does depend on your tax situation as well. It's one of those "fuzzy area" things where there is a differnce between an "occational sale" and something that happens more than once. I run into that same situation when I have a litter of puppies and sell them. To be on the safe side, I do pay income tax on that.

 

[salmoneous]

Calling all tax experts! Does anyone know if there are any tax implications if you rent points? Do you have to record it as income on your 1040?

Someone renting points would need to consider state and federal income taxes, as well as Florida sales and hotel taxes. Although there are a few exceptions out there, most people would end up owing taxes. In any case, just trying to understand exactly what taxes you do and do not owe would be extremely complicated - not answerable on a board like this one, but requiring the services of a professional tax adviser.

 

[Plutofan]

Some of the exceptions to not reporting the income do not apply to timeshares so "consult a tax advisor" is great advise. If you rent off points it is also good advise to understand the tax implications with Florida and the applicable county (usually oranage co) about the taxability of rental income before you start renting off points.

 

[DebbieB]

My biggest question is how do you define "profit" for taxes. You paid for the points originally, you also pay dues.

 

[salmoneous]

My biggest question is how do you define "profit" for taxes. You paid for the points originally, you also pay dues.

Remember that for Federal Income Tax, you report "income", not profit. As a very general rule when renting real estate, you would report all the money you get as income, then take a deduction for your expenses. Again just a very general rule - you would want to talk to a professional for DVC/your situation specifics - you would be able to deduce your annual dues + an amortized portion of your buy in, approximately your buy-in cost divided by number of years. (To give you some idea of the complexity, the law treats general maintenance differently from capital improvements, so maybe you wouldn't want to deduce the full maintenance costs).

 

[soonertxmickey]

So for us non accountants.... pay taxes on rented pts. and deduct maintenance dues & interest charged for loan term. I know anything said here cannot be percieved as financial advice and I will hold no one responsible. blah blah blah. You guys live this stuff, just need some advise. thanks.

 

[Mule2007]

Now I'm curious:

If you can't use your points and rent them to someone -- you file as income

If you use your points and don't rent - you don't file

If you don't use your points and don't rent them - would you then file as loss based on mkt prices?


Mule

 

[bpmorley]

Calling all tax experts! Does anyone know if there are any tax implications if you rent points? Do you have to record it as income on your 1040?

If the person renting from you pays you with a money order then I wouldn't worry about it. What the IRS doesn't know won't hurt them.

 

[rinkwide]

If the person renting from you pays you with a money order then I wouldn't worry about it. What the IRS doesn't know won't hurt them.

I'd cancel the reservation and pocket the cash.

 

[salmoneous]

If the person renting from you pays you with a money order then I wouldn't worry about it. What the IRS doesn't know won't hurt them.

While I'm sure a great number of people don't report rental income from DVC, openly encouraging people to commit tax fraud is probably not going to be viewed as an appropriate post by the board owners.

As a side note, people who get caught not reporting taxable income usually have to pay back taxes, interest and fines. Painful, but not the end of the world. People who get caught actively trying to hide income from the IRS often go to jail.

 

[salmoneous]

If you don't use your points and don't rent them - would you then file as loss based on mkt prices?

Sadly, no. You almost never get a tax loss for money you might have gotten.

 

[crisi]

While I'm sure a great number of people don't report rental income from DVC, openly encouraging people to commit tax fraud is probably not going to be viewed as an appropriate post by the board owners.

As a side note, people who get caught not reporting taxable income usually have to pay back taxes, interest and fines. Painful, but not the end of the world. People who get caught actively trying to hide income from the IRS often go to jail.

There is also a reward for tipping off the IRS for tax cheats. Openly encouraging tax fraud is probably not real smart unless you are scrupulous in your own filing. There is at least one former government tax auditor on these boards.

 

[izzy]

I was pretty sure that it would have to be added to my income, but I just wanted to make sure. I certainly don't want to run afoul of the IRS!!

I'm probably going to buying into AKV, and I was going to rent the double developer points in order to get the effective cost per point down to $84. However, between worrying about how to report the income, possible Florida sales and hotel tax issues, and just the overall hassle of finding someone to rent my points, I don't think I'm going to do that. I'll just either take the cash discount, or possibly see if I could use the double developer points to take a Disney cruise. I only have but so much vacation time in the next 7 months, and it would take quite a bit of time for me to use up 320 points, assuming I could get the reservations I needed anyway.

Thanks, everyone!!

 

[Plutofan]

While I'm sure a great number of people don't report rental income from DVC, openly encouraging people to commit tax fraud is probably not going to be viewed as an appropriate post by the board owners.

As a side note, people who get caught not reporting taxable income usually have to pay back taxes, interest and fines. Painful, but not the end of the world. People who get caught actively trying to hide income from the IRS often go to jail.

In addition to the back taxes, interest, penalties from the IRS you could also be hit with taxes, interest and penalties from Florida and Oranage Co. Over time these could add up to be a significant amount even if you rent occassionally. I am not sure how Florida and Oranage Co work from a non filer situation but a lot of taxing authorities do not start the statue of limitations runing until a return is filed. So it could get very expensive if you get reported to one of the taxing authorites.

 

[dunkie7557]

Any income you make no matter how small is reportable to the IRS. Income can come from anything you sell . The IRS considers it all! Cheating on your taxes is not the way to go and hurts everyone who is not breaking the law. We are all paying for your cheating. Ask your accountant. He will tell you that every cent must be reported to the IRS.

 

[bpmorley]

As a retired IRS employee I tell everyone to fudge their taxes as much as possible. If you can make cash under the table it's none of their business. Just my 2 cents.

 

[Starr W.]

As a retired IRS employee I tell everyone to fudge their taxes as much as possible. If you can make cash under the table it's none of their business. Just my 2 cents.

You're a brave man for saying that here!

 

[bpmorley]

You're a brave man for saying that here!

I wouldn't say brave. But I would tell anyone that could to stick it to them. They're middle class marauders. They don't audit the poor cause there is nothing to take, they don't audit the rich because it costs too much in lawyer fees, so they take it all out on the middle class who have something to take and usually won't get a lawyer because of the cost. And the way it's run, let's just say that I could type for days of mismanagement. All I'm saying is that if I rented my points and got paid in cash, money order, or even a personal check I wouldn't report it.

 

[Chuck S]

Remember, that if that membership is owned by a corporation...or if the reservation is rented by a corporation...there is a chance a 1099 will be issued. Audits aren't my idea of fun.