Does renting to pay really work?

[labst60]

Because I was curious, I looked this up on the IRS site... there was a FAQ directly related to this subject:

<<cut and paste from irs.gov>>
I received income for renting out my timeshare for a week. I understand that I don't have to report income from any rental less than 15 days, but the property management company reported that income to the IRS. Do I have to report it when I file?

If you use the dwelling unit as a home (based on degree of personal use) and you rent it for fewer than 15 days during the year, do not include any of the rent in your income and do not deduct any of the rental expenses. If you do not meet the tests for using your timeshare as your home, the income is reportable on Form 1040, Schedule E (PDF), Supplemental Income and Loss.

<<<end>>>

The definition of dwelling unit used as a home is if you use the unit for personal purposes more than the greater of :

1) 14 days, or
2) 10% of the total days rented to others at a fair rental price.

Hope this helps someone!!

 

[disneyberry]

<font face="times" size="+0">I looked into the whole income tax issue for doing my tax returns last year. The following are excerpts from an older post of mine on this topic:

"(snip) I'm not so sure you can deduct Property Taxes for rental purposes if you already deducted it on Schedule A. Also, the portion of our annual dues that applies to Capital Improvements is NOT deductible except as part of the adjusted cost basis that you use to figure your depreciation expenses - which BTW as I understand it, should be calculated using the MACRS 27.5 years method... it ends up being a very small number. Not what you would think... (snip)

IRS Publications 527, 946, 551 contain detailed info (pretty difficult to fully understand though, just like all IRS publications ). The Instructions for Form 4562, and for the 1040 Schedule E are also useful.

I also found the following two threads on the TUG very helpful:
http://www.tug1.net/tugbbs1/Forum1/HTML/004381.html
http://www.tug1.net/tugbbs1/Forum1/HTML/005921.html

BTW, I would argue that unless you stay at DVC more than 36 days a year, it's not possible to claim DVC as a "Dwelling Unit Used as Home" because the definition in Pub 527 is that you must use DVC for personal purposes for more than the GREATER of 1) 14 days, or 2) 10% of the total days it is rented to others at a fair rental price. Since DVD rents out DVC units to the cash paying public all the time, I would guess that at least one DVC room is rented out every day of the year. 10% of that would be 36.5 days. Just some food for thought. I am no tax expert, but for those who plan to discuss this with a tax advisor next year, you could bring some of this info to them.

Oh, and unless you are a business, you can't have a loss of income from renting DVC. Anyway, that's enough of my foray into tax accounting." (snip) </font>