Canadian DVC owners renting out points and tax implications?

[Drmamabear]

Sorry if this has been posted but was unable to find a thread...

We became owners as of last year. Trying to rent out points through an agency and the dvc rental store mentions receiving a form to file with the IRS for non-US citizens. Have any Canadian DVC owners rented out points and ended up filing income tax on profits to IRS, CRA?

 

[tgropp]

II have never had to file on income tax yet...but nothing will surprise me

 

[mort1331]

Sorry if this has been posted but was unable to find a thread...

We became owners as of last year. Trying to rent out points through an agency and the dvc rental store mentions receiving a form to file with the IRS for non-US citizens. Have any Canadian DVC owners rented out points and ended up filing income tax on profits to IRS, CRA?

Shhh... its minor income to offset our dues. Dont give them ideas.
If just starting try the first couple of times with Daves. He is out of London, Ont. Then just use the rent/trade boards here.

 

[mort1331]

And no nothing with US IRS. Just if you sell. But then you can get a chunck back

 

[Drmamabear]

And no nothing with US IRS. Just if you sell. But then you can get a chunck back

Thanks so much.

 

[Mickey&JoshNut]

When you submit your income tax return remember this certification that you sign and that should answer your question as to whether the amount you receive from renting your DVC points should be reported to the CRA.

"I certify that the information given on this return and in any documents attached is correct and complete and fully discloses all my income.


Sign here


It is a serious offence to make a false return."

 

[Drmamabear]

When you submit your income tax return remember this certification that you sign and that should answer your question as to whether the amount you receive from renting your DVC points should be reported to the CRA.

"I certify that the information given on this return and in any documents attached is correct and complete and fully discloses all my income.


Sign here


It is a serious offence to make a false return."

I meant more for IRS - do you file as a Canadian for rental income? Heard once you file, you have to file every year forever.

 

[bankr63]

There was a thread on this subject in TUG (Timeshare User Group) a long while back but I wasn't able to find a suitable search for it since "tax" and "IRS" are both too short a search phrase, and everything else I tried came up with too many random hits.

IIRC, the gist of it was that tax is probably not owing as your expenses are generally higher than your income. However, legally you have to declare, and yes it becomes a (minor) grind every year after. Many (most?) choose not to file, but if you are questioned by the IRS and found in default you could have problems in the future. Among other things, it was mentioned that you could have issues with entry to the US as a tax cheat, so could effectively lose the use of your ownership. It seems to me that the thread got started because the IRS was becoming more interested and was somehow pushing the resorts to send the election forms to their foreign owners.

I really do wish I could find that thread, as there a couple of very knowledgeable lawerly types there, and it was well laid out. I am just going from memory, as it scared me off of ever renting out my timeshares in the US. I'll poke around some more and post back if I eventually find it.

What you might want to do is consult with a US tax specialist here in Canada. They aren't hard to find and will give you the correct advice rather than my or others' supposition.

 

[mab2012]

There's lots of information about this topic to be found online. This is one of the better sources I came across:

http://www.bdo.ca/BDO/media/Tax-Factor-Banners/US-Tax-Issues-for-Canadians.pdf

My rough non-professional understanding:

As a Canadian resident who owns US property, your US rental income is taxable both in the US and in Canada. Moreover, in the US, an agent who rents your property on your behalf (eg. DVC store) is required to withhold taxes on that rental, at a rate of 30% of the gross rental income. If they don't withhold, and you don't file, they can be held responsible for those taxes. Therefore, some DVC rental agents have begun withholding, even on small transactions. The withholding tax is generally more than your actual taxes owing. If you want to recover the difference, or reduce the tax withheld upfront, you'll need to file a US tax return. In either case, your rental income must also be reported on your Canadian tax return, and some or all of the tax you paid in the US can be recovered as a foreign tax credit. It's not entirely clear to me why you should care about the 30% withholding rate if you can claim it back on your Canadian tax return, but I think the catch here is that you can't claim back more than the Canadian tax owing on that particular income, which may well be less than the 30% withheld.

Somewhat off-topic, but much the same principles apply on the sale of a US property.

Personally, I think the whole thing is just too complicated to make renting worthwhile, unless you're prepared to do it under the table, with all of the legal and ethical implications that implies.

I meant more for IRS - do you file as a Canadian for rental income? Heard once you file, you have to file every year forever.

I don't think this is true. Once you make an election to file rather than having taxes withheld at 30%, that election is apparently "permanent" (or not easily changed, anyway), and you are then required to file as long as you have income to report. But if you don't rent your property in a given year, or no longer own US property and have no other source of US income, then there would be no reason to file.

https://www.irs.gov/individuals/international-taxpayers/taxation-of-nonresident-aliens

That said, I'd have to be losing a pretty good chunk of money before I would think it worthwhile to apply for an ITIN. That just feels like a can of worms that I'd rather not even open.

 

[AdamsMum]

I've been wondering about income tax myself. Had to bank some points to next year, and would like to take a year off. Asked at David's (am I allowed to mention names?) as they are a Canadian company. They wouldn't advise me but directed me to this link. I fell for a shelter scam 15 years ago, and got hit hard by CRA when they reversed everything, and charged me interest. What a nightmare. I'd rather not be in trouble with CRA again (or the IRS). If I have to file in the U.S. that's a deal breaker. Too much trouble for the amount of money it would net me.
Anyone know if its done through a Canadian company if it's considered Canadian income?

 

[Madame]

I've been wondering about income tax myself. Had to bank some points to next year, and would like to take a year off. Asked at David's (am I allowed to mention names?) as they are a Canadian company. They wouldn't advise me but directed me to this link. I fell for a shelter scam 15 years ago, and got hit hard by CRA when they reversed everything, and charged me interest. What a nightmare. I'd rather not be in trouble with CRA again (or the IRS). If I have to file in the U.S. that's a deal breaker. Too much trouble for the amount of money it would net me.
Anyone know if its done through a Canadian company if it's considered Canadian income?

We rented out via Dave’s. Claimed the $ earned as income & claimed the $ paid in dues for the points. I know some don’t claim the income, but we don’t mess with the CRA.

 

[mort1331]

Another way to look at this is....When you have a garage sale, sell something on kijiji, ebay, facebook,,etc. do you claim that as income? Do you then go back and claim what you bought that item for and the depreciation?
If you rent to your friend, co-worker, family do you claim?
If these are yes to you then yes claim, if no, then you decide. The amount most of us rent out and the actual dollar figure, if you figure out dues,amount payed in, depreciation, time left, doesnt amount to a whole lot.
Your choice.

 

[AdamsMum]

If you rent to your friend, co-worker, family do you claim?

When I've rented in the past to family or friends I've only asked that they reimburse the cost of the maintenance fees. So no income to report.

Thanks everyone for your input. Makes it easier to make my decision. Love these boards!