Do I pay taxes on points rented

[Tigger2ntinkerbell]

Thinking about using H&R Block online just to see how much of a hit we'll be taking this year.
They said you can file online with them for free. So just might give them a try.
Used Tax Act last year and they messed up my payment to the IRS, long story short, had to make an appointment with IRS to get things fixed(did owe more than what was originally due).

 

[Tigger2ntinkerbell]

If you use TurboTax, it's Misc Income and it takes you through all the steps. Enter the money made, subtract your costs (annual fees, booking charges, etc). I had a 1099Misc from Hilton for renting out my week at my other timeshare. It showed me full price rental cost and I subtracted the costs to rent it and the annual fees for maintenance. It was a wash on that week. But if you are renting out lots of points, it might not be a wash.

I thought you could only subtract the Annual fees(realstate tax) not the maintenance fees. I'll check out Turbo Tax too.

 

[tidefan]

I thought you could only subtract the Annual fees(realstate tax) not the maintenance fees. I'll check out Turbo Tax too.

It's probably somewhat complicated. (NOTE: I would definitely suggest talking with a tax pro on this). However, whether you take it as an expense probably depends on if you took a deduction for the real estate portion of the maintenance fees. If you did, then you would probably only be able to expense that portion of the maintenance fees that you did not deduct as property tax (does that make sense?).

As to buy-in cost and the usage determination, that may depend on if you are a predominant renter, or if you are just a sometimes renter. Again, I'd ask a pro...

 

[Tigger2ntinkerbell]

So we went to the tax accountant and we didn't rent out enough days or use it as a "vacation home" business, and did not have to include it as extra income in our taxes.

So we will not be renting out in the future.

Thanks guys for all your help

 

[Spartan86]

So we went to the tax accountant and we didn't rent out enough days or use it as a "vacation home" business to have to include it in our taxes.

So we will not be renting out in the future.

Thanks guys for all your help

Sorry to be dense but, accountant said you did, or did not have to claim it as income? I can read your statement/reaction both ways.

 

[Tigger2ntinkerbell]

Sorry to be dense but, accountant said you did, or did not have to claim it as income? I can read your statement/reaction both ways.

Sorry - just realize I made a mistake.
We did not have to claim it as income.

 

[Spartan86]

Sorry - just realize I made a mistake.
We did not have to claim it as income.

Thanks for the clarification.

 

[HappilyEverAfter2007]

Sorry - just realize I made a mistake.
We did not have to claim it as income.

This is good information to know. We are currently under contract on a resale with 2018 points being carried over. Our plan was to rent out those points to cushion MF and what not but now I may just bank and swung for a 1bd vs studio at AKV just for less anxiety about this. We do use an accountant for tax filing however so they hopefully would have the resources to inform us as well.

 

[Spartan86]

DYODD
https://homeguides.sfgate.com/tax-benefits-renting-timeshare-80928.html

 

[Dean]

Actually, you would only need to declare the amount over the value of what you paid for the points (initial cost per point + maintenance fees - probably in the $7/8ish per point range, though that will vary based on many factors). That is your income (the total is your revenue), otherwise you’re being taxed on someone else’s vacation...

You can't deduct the up front costs but in VERY RARE instances you could depreciate it. Basically only the dues and any direct expenses like advertising.

I thought you could only subtract the Annual fees(realstate tax) not the maintenance fees. I'll check out Turbo Tax too.

That's correct, just the tax portion if you itemize. Most won't be able to this year, I've seen estimates at under 3%.

So we went to the tax accountant and we didn't rent out enough days or use it as a "vacation home" business, and did not have to include it as extra income in our taxes.

So we will not be renting out in the future.

Thanks guys for all your help

I think your accountant is misinformed, most are when it comes to timeshares. Vacation home rules rarely apply unless you have significant volume and possibly never for a club/points system. Here's a quote from a CPA who's also well versed in timeshares

VACATION HOME RULES
Wouldn't the vacation home tax rules apply to a rental gain, allowing you to avoid reporting the income, because you rented the property for fewer than 15 days? No, the vacation home tax rules will usually not apply. Thus, you must report the rental profit - whether you own one week or a number of weeks.

The vacation home rules apply only if you use the "vacation home" for at least 15 days each year for personal purposes. A timeshare can qualify as a vacation home. However, unless you own at least four weeks at a single resort, using at least three of the weeks for personal purposes, you can't take the benefit of excluding the income from renting the fourth week, because there is no practical way that you could use your timeshare for at least 15 days and rent it out to others.

Thus, in almost every situation, you must report the rental profit. You can also offset losses from some rentals against profits on others to minimize your net taxable income, but deducting a net loss is still subject to the rules above.

 

[Tigger2ntinkerbell]

Dean , the IRS accepted our return and no extra money due than what our tax account said.
We have nothing to claim , no deductions. And did not have to pay for the points(amount $$)we received for renting them out.
More than likely it was because of our income total and the extra earned income didn't qualify to claim it.

 

[chalee94]

Dean , the IRS accepted our return and no extra money due than what our tax account said.
We have nothing to claim , no deductions. And did not have to pay for the points(amount $$)we received for renting them out.
More than likely it was because of our income total and the extra earned income didn't qualify to claim it.

The IRS "accepting" your return at this point is mostly based on a simple math check. If discrepancies come up later, they may follow up with a letter to clarify your amounts reported. If they decide you have taken an overly aggressive position, they can start an audit to see what else they can find.

If you received rental income and did not report it, you are taking an aggressive tax position and hoping that you don't get caught. It's that simple.

 

[Tigger2ntinkerbell]

I figured I'll get a letter, that's fine. But just kinda nuts , I told the tax account about it as earned income .
If it comes back we owe more, than accountant has to pay for the mistakes not us.

 

[Dean]

Dean , the IRS accepted our return and no extra money due than what our tax account said.
We have nothing to claim , no deductions. And did not have to pay for the points(amount $$)we received for renting them out.
More than likely it was because of our income total and the extra earned income didn't qualify to claim it.

The IRS "accepting" your return at this point is mostly based on a simple math check. If discrepancies come up later, they may follow up with a letter to clarify your amounts reported. If they decide you have taken an overly aggressive position, they can start an audit to see what else they can find.

If you received rental income and did not report it, you are taking an aggressive tax position and hoping that you don't get caught. It's that simple.

I agree with Charles that it being accepted means nothing. Even if you call and ask you'll likely get 4 answers on 3 phone calls. And the reality is it will likely never come up but what I gave you is the technical information as I understand it. Basically most tax prepares don't understand the differences for timeshares, the 15 night free almost never applies to timeshares and the ability to depreciate it almost never applies. Also the "trip to check on it" as a deduction would almost never apply. When these things would apply would assume large volume and using the actual owned resort with almost no personal usage.

 

[Tigger2ntinkerbell]

Does it usually take the IRS to notify you by mail within 30 days??. Thank you all. I really appreciate it.

 

[Dean]

Does it usually take the IRS to notify you by mail within 30 days??. Thank you all. I really appreciate it.

It's often months before you hear anything if there's a discrepancy, I've seen it a year later when you get a letter and a bill. And as I eluded to, they won't give you an answer and stick with it ahead of time. But as I noted, usually most things listed that aren't done correctly never come to light.

 

[crisi]

You would be able to count buy-in cost?
I would think you would only be able to count maintenence fees and interest (if you have a loan).

No, you couldn't include your buy in costs.

 

[crisi]

It's often months before you hear anything if there's a discrepancy, I've seen it a year later when you get a letter and a bill. And as I eluded to, they won't give you an answer and stick with it ahead of time. But as I noted, usually most things listed that aren't done correctly never come to light.

YEARS. I've had them come back years later with a discrepancy. Which turned out to be a "no big deal" error in that I didn't include a form and miscalculated stock options.

I would never recommend anyone cheat on their taxes (really, I hate tax cheats), but if this is something you haven't done, don't loose sleep over it. They aren't going to audit you over this - especially if they never got a 1099 and if your renting was casual - it isn't worth their time. Now, if they audit you for another reason - then you'll probably end up paying some back taxes on it, because they will find the transaction that put money in the bank (they are very interested in your deposit history under an audit)

 

[Tigger2ntinkerbell]

crisi,
First time every renting out our points and we aren't going to do it again.
I don't believe in cheating on your taxes, just couldn't get the accountant to understand that its earned income from a rental(total 6 dsys).
I have money put aside for this just in case I have to pay a little extra (not sure how much, I figured $300).

 

[kniquy]

Ok, not sure what wdrl was talking about. I'm a Michgan resident.
First rental totaled $1,599.00(123 pts) at $13.00 pp.
Second rental totaled $182.00(14 pts) at $13.00
Grand total:$1,781.00

So from those amounts you should be deducting expenses related to those points -maintenance fees, any cost for mailing or communicating with the renters, a portion of the real estate taxes that you paid for that year of points used. Maybe there are other "expenses" that would help off set.

Just the maintenance fees @ $7 per point would be $861. Bringing your taxable income at least down to $920. Less taxes paid on the property - so if you are only adding $900 to your income it will likely not make much of a difference if any in your refund