DVC and Tax Time

[GoofyasGoofy]

I am a little unsure about how this all works. I know that it is different in each state, but is it true that you can write off a portion of the taxes from DVC ownership as a second residance in some states? and what are the benefits of owning a second home/DVC?.....anybody?

 

[Maistre Gracey]

I have close to zero tax knowledge, so I will relay only what my accountant does in my particular situation-

He DEDUCTS (different than write off) the property taxes, and deducts any mortgage interest.

I always thought it was gray because we own at three different resorts. We always combine them into a single second home, but in reality one could look at it as three additional homes.

MG

 

[drag n' fly]

must be nice

 

[3pirates]

I have close to zero tax knowledge, so I will relay only what my accountant does in my particular situation-

He DEDUCTS (different than write off) the property taxes, and deducts any mortgage interest.

I always thought it was gray because we own at three different resorts. We always combine them into a single second home, but in reality one could look at it as three additional homes.

MG

This works, as long as you itemize your deductions...and is not a state issue, it is for your federal tax return! You should get a statement at the end of the year with the proper totals broken out.

Goes on your itemized deduction schedule, along with interest and property taxes on your home. As far as I know there is nothing you can do with the rest of the expenses on your dues.

 

[Blahnde]

What others have said here about deducting the mortgage interest and property taxes is true! It starts on your federal tax return as a Schedule A deduction and, for most states, carries to your state tax return, too.

As for the concern about multiple contracts, it is not an issue because you can use your points from various contracts together for one stay (if you choose to) and therefore it is considered one "home." If you were unable to comingle your contract points to stay at various locations then it would matter, but the way DVC runs the point system it is one "home" because you are one "member." Now if you have a similar timeshare through Marriott or another company, that would be a separate "home" and then you would need to see which 2 give you the most bang for your buck!

For those of you with motorhomes or houseboats, if they have sleeping, cooking, and bathroom facilities they are considered a "home" so you need to pick your best two "homes" and use the mortgage and property tax for those two.

As for the other part of your dues, unless you rent your points these are in no way tax deductable! But if you do rent points, you generally have to declare the income and can therefore take the expenses, i.e. dues, to offset your income. This concept is not for the faint at heart, however! Make sure if you are renting points that you keep good records for your tax professional so they can keep you out of trouble!

And if you are in Northern California and need a tax professional, I would be happy to help!

Blahnde

 

[drag n' fly]

What others have said here about deducting the mortgage interest and property taxes is true! It starts on your federal tax return as a Schedule A deduction and, for most states, carries to your state tax return, too.

As for the concern about multiple contracts, it is not an issue because you can use your points from various contracts together for one stay (if you choose to) and therefore it is considered one "home." If you were unable to comingle your contract points to stay at various locations then it would matter, but the way DVC runs the point system it is one "home" because you are one "member." Now if you have a similar timeshare through Marriott or another company, that would be a separate "home" and then you would need to see which 2 give you the most bang for your buck!

For those of you with motorhomes or houseboats, if they have sleeping, cooking, and bathroom facilities they are considered a "home" so you need to pick your best two "homes" and use the mortgage and property tax for those two.

As for the other part of your dues, unless you rent your points these are in no way tax deductable! But if you do rent points, you generally have to declare the income and can therefore take the expenses, i.e. dues, to offset your income. This concept is not for the faint at heart, however! Make sure if you are renting points that you keep good records for your tax professional so they can keep you out of trouble!

And if you are in Northern California and need a tax professional, I would be happy to help!

Blahnde

That was really good info. I will check Canadian laws for info relating to us.

 

[WendyinNC]

There is a limit to the number of 2nd homes? I have DVC points at 2 different resorts and 2 weeks at a resort in the mountains of NC (weeks 30 and 52). So, I have 4 deeds. If I understand correctly I can combine the 2 DVC contracts. Can I combine the 2 weeks traditional timeshare? Am I limited to one timeshare or two?

 

[Blahnde]

Hello WendyinNC!

To answer your question (and clarify for anyone else who was wondering!) you are only allowed to deduct the mortgage interest and property taxes for two homes.

If you are my boss who owns three personal residences AND two timeshares (Marriott and Hilton) AND a mobilehome (RV) AND ... you get the idea (AND it is true!) he can only use two. Since he bought the timeshares and RV outright there was no mortgage, and compared to his personal residences the property taxes were low, so it was a no brainer to use the two newest and most expensive personal residences that were financed and had substantial property tax bills.

When it comes to your personal situation, my advice (and remember what you paid for it!) is that DVC is one "home" and the two weeks in the mountains are one "home" for a total of two. Even though you have multiple contracts, DVC sees you as one member and you can comingle your points. As for the mountain home, I would argue that it is one physical property and that you only have rights for specific weeks is irrelevant. If you owned it outright and rented two weeks in June (in which you would no longer have occupancy rights during those weeks) it would still be considered one property, so that you can only occupy this home for two separate weeks does not make it two homes.

So if you also have a personal residence, you own three homes and must pick two to deduct on your tax return. I would look at the mortgage interest and property taxes for each of the three and select the two with the largest combined deductions. This gets into another area where people like to play games that the IRS does not like ... you CANNOT mix and match the mortgage interest and property taxes! Let's say that the highest two interest payments were on homes 1 and 2, but the highest property taxes were on homes 2 and 3. Clearly home 2 is going on your tax return, but do not put the mortgage interest of home 1 and the property tax of home 3! You have to decide between 1 and 3, and put both deductions from that property on your return. So it is best to just add the mortgage interest and property taxes for each property and pick the two largest numbers.

And while this is a little off-topic I also want to add that currently the most audited area for the IRS is mortgage interest! In the last few years so many people have been refinancing to take out cash, taking out second mortgages, and getting equity lines of credit that the IRS knows there are a lot of people out there who have incorrectly deducted more mortgage interest than allowed. And the easiest way to check is with the information you give them ... if your property taxes and mortgage interest are out of whack (tax of $500 and interest of $30,000 on a return I recently helped represent in audit) they are going to question those deductions. It is a complicated issue that can be extremely difficult for even a knowledgable tax professional to report correctly, which is why the IRS is auditing it! So my best advice is that if you have any of the above situations, especially if you have gotten more than $100,000 out of the deal, get a professional because TurboTax will not walk you through this! And when you talk to your professional, make sure you let him/her know that you are concerned that your interest is reported correctly ... we cannot read minds!

I know that was long winded, but compared to the IRS's explainations, I was brief!

Blahnde

 

[Doug Wolfe]

My accountant does deductions for mortgage interest and real estate taxes.

 

[cag4nyg]

Blahnde,

Question... My partner and i bought DVC this year. We hold it as joint tennets with right of survivorship as FL does not allow us to hold it as community property like we do our home in CA. When the documents were filled out they took my SSN for the tax form as i was a cast member at the time and i had to be first on everything for the discount. Can my partner claim the intrest and such on DVC?

Thanks

cag

 

[Blahnde]

Hello Cag!

The following comes directly from the IRS’s instructions for Schedules A & B (Form 1040) for 2006. Schedule A is used to deduct this interest (and property taxes, too!) 2007’s instructions are not yet released, but at this point I would not anticipate any change related to this issue. Form 1098 is what you receive from DVC (mortgage holder) to report the interest and property taxes you paid to them. Like your W-2, a copy of this form is provided to you and to the IRS.

“Enter on line 10 mortgage interest and points reported to you on Form 1098 under your social security number (SSN.) If you and at least one other person (other than your spouse if filing jointly) were liable for and paid interest on the mortgage, and the interest was reported on Form 1098 under the other person’s SSN, report your share of the interest on line 11… [and] … attach a statement to your return showing the name and address of that person. To the right of line 11, enter “See attached.””

The IRS does not care how your mortgage is written; their concern is that only parties that are “liable for and paid” the mortgage will be allowed to take the deduction. If both of you are on the mortgage paperwork and you both pay the mortgage, you meet this condition.

So if the Form 1098 comes in your SSN, you would report it on line 10 and/or your partner would report it on line 11. Therefore, you can choose to split it (at any ratio you want), or either of you could report it all. This arrangement may be changed every year, if you choose. Just do not take more than the total reported amount between your returns.

Also, property taxes go on line 6 for both of you and if you split it, I would keep the percentages the same. In other words, if you split the mortgage interest 60/40, then split the property taxes 60/40, also. To be most honest, I do not believe the tax codes says you must do this, but I would to be consistent … the IRS likes consistency!

Lastly, I noticed you mentioned you had a home in California. If this is your primary residence, are you registered domestic partners? I am not trying to pry, but if you are, for 2007 the State of California will REQUIRE you to file a joint return. Since you cannot file a joint federal return it will be a little bit of a pain for you or your preparer. Whoever does it will have to prepare two separate federal returns, and then create a “dummy” joint federal return from which to build your joint state return. Since this is new this year, and may apply to you, I wanted to make you aware of it.

Blahnde

 

[CarolA]

Folks, while I know Blahnde trying to give you good information.... Remember tax advice ON the DIS is worth what you pay for it..

(Do you really want to be sitting in front of the IRS auditor saying "The DIS Boards told me it was deductible"?)

 

[DisneyBride'03]

Thanks for the tips Blahnde....especially abt the RV...DH is from Portola Valley..you are in a great area!! Only "northern Californians" say they are FROM Northern Ca!!

 

[Dreamer13079]

Thank you for all of the great information. It is not often that someone who is educated in such a complex field is willing to take the time to explain it for free. I think we all know that what we read on the Internet isn't always fact but we also know when we are reading valid information too. Thank you again for taking the time.

 

[GoofyasGoofy]

Thank you for all of the great information. It is not often that someone who is educated in such a complex field is willing to take the time to explain it for free. I think we all know that what we read on the Internet isn't always fact but we also know when we are reading valid information too. Thank you again for taking the time.

I agree! i REALLY APPRECIATE THAT SO MANY PEOPLE ARE WILLING TO TALK-IT-UP ABOUT TAXES! tHANKS FOR ALL THE HELPFUL REPLIES!