DVC IRS tax deductions as 2nd home

[BoardwalkSuzy]

Do other DVC owners remember to deduct their property tax portion of maintenance fee to IRS? Since 1098's are sent out end of January each year for those that finance, I'm sure everyone remembers to deduct their interest. But does everyone check the annual dues statement to deduct their property tax amount? Just wondering because I haven't seen anyone list this as a "benefit" of DVC ownership. I always see deductions as a benefit of owning real estate. My husband says he's glad he married me because I came with write-offs being in the real estate business, and he has the job that takes withholding, and now gets back his entire withholding every year.

Just reading through the IRS documents. If your DVC ownership is a 2nd home, and you financed, then you can deduct interest and property taxes paid. If it's a 3rd home, you can deduct property taxes, but can not deduct any interest payments on a secured loan. You can always deduct property taxes on any number of properties you own.

If you do resell your points for profit, looks like you must pay Uncle Sam capital gains. If you resell your points for a loss, too bad, can't report the loss of your DVC points. Not fair, huh?

Has anyone rented their points through an agency, received that 1099-misc form, then reported income and deductions to IRS - how many deductions were you able to report? I've read there's some controversy as to how various CPAs report the deductions associated with renting out the points - most say there's a 15 day owner occupancy requirement, some say 10% of days owner must reside in order to claim more maintenance deductions. Does anyone know more on this?

From DVC Mike posting for 2010:

BCV

$3.6007 Annual Operating Budget
$0.6051 Annual Capital Reserves Budget
$0.9433 Taxes
=======
$5.1491 Annual Dues per point (2009 was $5.0007) - 2.97% increase

VGC

$2.5202 Annual Operating Budget
$0.6190 Annual Capital Reserves Budget
$0.7996 Taxes
=======
$3.9388 Annual Dues per point (2009 was $3.8215) - 3.07% increase

BLT

$2.0539 Annual Operating Budget
$0.8520 Annual Capital Reserves Budget
$0.8697 Taxes
=======
$3.7756 Annual Dues per point (2009 was $3.6709) - 2.85% increase

AKV

$2.9323 Annual Operating Budget
$1.0163 Annual Capital Reserves Budget
$1.0010 Taxes
=======
$4.9496 Annual Dues per point (2009 was $4.8554) - 1.94% increase

VWL

$3.4718 Annual Operating Budget
$0.7850 Annual Capital Reserves Budget
$0.9425 Taxes
=======
$5.1993 Annual Dues per point (2009 was $5.0376) - 3.21% increase

Reported by other members:

HHI
$4.1171 Annual Operating Budget
$1.1933 Annual Capital Reserves Budget
$0.2571 Taxes
=======
$5.5675 Annual Dues per point - 3.8% increase

VB
$5.1136 Annual Operating Budget
$0.9762 Annual Capital Reserves Budget
$0.5193 Taxes
=======
$6.6091 Annual Dues per point - 3.1% increase

VB Sub
$3.8367 Annual Operating Budget
$0.8236 Annual Capital Reserves Budget
$0.5193 Taxes
=======
$5.1796 Annual Dues per point - 4.1% increase

SSR

$2.4092 Annual Operating Budget
$1.0182 Annual Capital Reserves Budget
$1.0337 Taxes
=======
$4.4611 Annual Dues per point

OKW

$3.2306 Annual Operating Budget
$0.7067 Annual Capital Reserves Budget
$0.9360 Taxes
=======
$4.8733 Annual Dues per point - 2.9% increase

BWV

$3.4922 Annual Operating Budget
$0.9181 Annual Capital Reserves Budget
$0.9498 Taxes
=======
$5.3601 Annual Dues per point - 2.8% increase

 

[vicki_c]

I did deduct my DVC taxes last year (2008 taxes) but honestly couldn't figure out how to do it this year (2009) using H&R Block's program. I can't remember now what the issue was, but since I never was entirely comfortable with doing it anyway, and it's a tiny amount I just didn't worry about it. I don't think the amount I pay on DVC property taxes would have impacted my refund by more than a few dollars compared to my other property taxes!

In any case, it's something you should check with a tax professional before doing it. I read all the rules over a few times for the 2009 taxes and I don't think we met all the qualifications for deducting it.

 

[bwvBound]

Thanks for posting the recap from each resort's budget! I do remember to itemize the property taxes ... but you've made finding the data so much easier. Thanks again!!

 

[crisi]

I deduct them...but warning - TALK TO A TAX ADVISOR OR CHECK THE RULES YOURSELF. Not everyone is entitled to every deduction - the property tax deduction you SHOULD be good on, but the interest deduction with vacation homes can be tricky and there are exceptions.

NOTE: I am not your tax advisor, I'm not even a tax advisor. This should not be construed as tax advice other than as advice to talk to a professional advisor or read the rules for yourself. The IRS does not take kindly to the excuse "DisneyDad2014 told me it was deductible."

 

[dmoore22]

Deduction -- always!

 

[MissMet]

I always deduct them.

I use Turbo Tax & they said I could deduct them as a second mortgage as long as I use the "timeshare" for at least 10 days each year. I definitely do that. If one year you don't use your points for 10 days or more, you can't deduct them, but the following year, again, as long as you use them 10+ days you can deduct them.

That's at least what I was told.

 

[PHILCT]

Thank you for this thread.

I used my TURBO TAX software today, and included the Property Taxes.

I was confused on whether or not to report the ACTUAL 2009 TAXES or the PAID 2009 Taxes which ended up having a tiny credit afterwards.

Which one do you use: ACTUAL or PAID ?

 

[LisaS]

Thank you for this thread.

I used my TURBO TAX software today, and included the Property Taxes.

I was confused on whether or not to report the ACTUAL 2009 TAXES or the PAID 2009 Taxes which ended up having a tiny credit afterwards.

Which one do you use: ACTUAL or PAID ?

You would use the actual tax paid which is listed in your 2010 dues statement and also available online at dvcmember.com. Do not use the figures listed in the first post because those are estimated taxes for 2010 not actual taxes for 2009.

They estimate the taxes at the start of the year and include that estimated amount in the annual dues. The figures listed as "taxes" in the first post are the estimated tax for 2010. When the property tax comes due, it might be more or less than the estimate. If the actual taxes are lower than the estimate, they refund the excess as a credit on the following year's dues. If the estimate was too low, they add the additional amount due into the following year's dues. For those who pay monthly dues, they deduct that extra amount from your bank account along with your first monthly dues payment.

 

[bwvBound]

You would use the actual tax paid which is listed in your 2010 dues statement and also available online at dvcmember.com.

Thanks, exactly what I needed!

 

[RedSonya]

I met with my accountant this morning. He asked about the property tax and I didn't have the info. I knew I could rely on the DIS to find exactly where to find the info. Another $234 deduction! Thanks.

 

[chalee94]

I met with my accountant this morning. He asked about the property tax and I didn't have the info. I knew I could rely on the DIS to find exactly where to find the info.

just don't use the numbers in the OP as they are for 2010... (see the post from lisas.)

 

[BoardwalkSuzy]

Interesting - not much of a write-off for taxes at HHI or VB, so the WDW properties are better in that respect.

2009
Here are the 2009 annual dues:

AKV
Operating $2.8288
Reserves $1.0339
Taxes $0.9927
Total $4.8554

BCV
Operating $3.4628
Reserves $0.5918
Taxes $0.9461
Total $5.0007

BLT
Operating $2.0339
Reserves $0.8090
Taxes $0.8280
Total $3.6709

BWV
Operating $3.4854
Reserves $0.7764
Taxes $0.9501
Total $5.2119

VWL
Operating $3.2891
Reserves $0.8008
Taxes $0.9477
Total $5.0376

OKW
Operating $3.1547
Reserves $0.6383
Taxes $0.9410
Total $4.7340

SSR
Operating $2.3722
Reserves $0.9324
Taxes $1.0307
Total $4.3353

HHI
Operating $3.9931
Reserves $1.1189
Taxes $.2519
Total $5.3639

VB
Operating $5.2108
Reserves $.6906
Taxes $..5071
Total $6.4085
__________________

 

[oct2014]

Interesting - not much of a write-off for taxes at HHI or VB, so the WDW properties are better in that respect.

2009
Here are the 2009 annual dues:

...

SSR
Operating $2.3722
Reserves $0.9324
Taxes $1.0307
Total $4.3353

...

__________________

I still think you are working off of estimates instead of actual property taxes. I looked on dvcmember.com and it showed 1.0302 for my SSR points. Not a big difference for me because we don't have many points, but for those with more it could be important to check the actual taxes paid. It makes sense that the IRS wouldn't care what we paid to DVC based on estimated taxes (at least for purposes of our taxes rather than DVC's), it would care what DVC actually paid to the state during that year.

Caroline

Caroline

 

[BoardwalkSuzy]

I always deduct them.

I use Turbo Tax & they said I could deduct them as a second mortgage as long as I use the "timeshare" for at least 10 days each year. I definitely do that. If one year you don't use your points for 10 days or more, you can't deduct them, but the following year, again, as long as you use them 10+ days you can deduct them.

That's at least what I was told.

That's great if that is so. When I meet with my CPA, will ask if can do that. I would think that just the portion of the time you rent would be deductible, though - like stay 10 days, rent 5, would think you could only deduct 1/3 of the maintenance remaining after deducting the full property tax. Pg 22 of Pub 527 - IRS Form Personal Use of Dwelling Unit (Including Vacation Home) seems to confirm this.

From: http://www.irs.gov/pub/irs-pdf/p936.pdf
Bottom of Pg 2 "Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at fair rental, whichever is longer." See Pub 527.

However, the IRS publication also says on Pg 22 of Pub 527:
"If you use the dwelling unit as a home and you rent it fewer than 15 days during the year, that period is not treated as rental activity. Do not include any of the rent in your income and do not deduct any of the rental expenses." Humm. Another item to ask the CPA since I read that the rental agencies for DVC points will send you a 1099-misc form at end of the year.

Don't depend on your CPA to find all your deductions! Always do some of your own research and work WITH your CPA, as even the best CPA's miss things, and you could be paying taxes that you shouldn't be paying.

Of course, the taxes included in the maintenance fees I posted in previous post are only estimates projected by the association, so if DVC posts the actual taxes paid, then those are the figures to use in filing.

Sounds like from other posts, that once you have your membership login, you have access to all that data. Just found out today that my contract passed ROFR from Disney - 350 BWV points! I'm finally getting into the DVC soon. My family is excited. Son wants to go on the cruise - he saw the ship up on my computer screen today.

 

[RobDoc]

...
Of course, the taxes included in the maintenance fees I posted in previous post are only estimates projected by the association, so if DVC posts the actual taxes paid, then those are the figures to use in filing.
...

The actual property taxes paid for 2009 for each contract owned are found in the 2010 dues statement - sent out at the end of 2009 to every owner.

 

[Dean]

That's great if that is so. When I meet with my CPA, will ask if can do that. I would think that just the portion of the time you rent would be deductible, though - like stay 10 days, rent 5, would think you could only deduct 1/3 of the maintenance remaining after deducting the full property tax. Pg 22 of Pub 527 - IRS Form Personal Use of Dwelling Unit (Including Vacation Home) seems to confirm this.

From: http://www.irs.gov/pub/irs-pdf/p936.pdf
Bottom of Pg 2 "Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at fair rental, whichever is longer." See Pub 527.

However, the IRS publication also says on Pg 22 of Pub 527:
"If you use the dwelling unit as a home and you rent it fewer than 15 days during the year, that period is not treated as rental activity. Do not include any of the rent in your income and do not deduct any of the rental expenses." Humm. Another item to ask the CPA since I read that the rental agencies for DVC points will send you a 1099-misc form at end of the year.

Don't depend on your CPA to find all your deductions! Always do some of your own research and work WITH your CPA, as even the best CPA's miss things, and you could be paying taxes that you shouldn't be paying.

Of course, the taxes included in the maintenance fees I posted in previous post are only estimates projected by the association, so if DVC posts the actual taxes paid, then those are the figures to use in filing.

Sounds like from other posts, that once you have your membership login, you have access to all that data. Just found out today that my contract passed ROFR from Disney - 350 BWV points! I'm finally getting into the DVC soon. My family is excited. Son wants to go on the cruise - he saw the ship up on my computer screen today.

It is VERY difficult, almost impossible, to qualify for the free 15 days of rental per year for a timeshare. To deduct the interest one must have an actual mortgage, just having a loan associated with ownership is not enough. Apparently DVC does set it up as a mortgage but those that use a personal line or credit or CC would not. Those that used a HELOC should be able to do so if on their primary residence. Also, you can only deduct 2 so if you have a second home and DVC, you wouldn't be able to deduct for 3.

 

[BoardwalkSuzy]

It is VERY difficult, almost impossible, to qualify for the free 15 days of rental per year for a timeshare. To deduct the interest one must have an actual mortgage, just having a loan associated with ownership is not enough. Apparently DVC does set it up as a mortgage but those that use a personal line or credit or CC would not. Those that used a HELOC should be able to do so if on their primary residence. Also, you can only deduct 2 so if you have a second home and DVC, you wouldn't be able to deduct for 3.

True - don't finance anything like this on a credit card! Hope no one does that. Cash or secured mortgage only! If already have 2 homes, better have cash for the 3rd since can only deduct interest for first 2 homes from what I've read.

 

[crisi]

True - don't finance anything like this on a credit card! Hope no one does that. Cash or secured mortgage only! If already have 2 homes, better have cash for the 3rd since can only deduct interest for first 2 homes from what I've read.

Well, if you are going to go there, you are better off paying cash for all three, but few of us can. If you are going to balk about not getting a $.30 deduction for each $1 you give your financing company, why would you give them the other $.70?

 

[BoardwalkSuzy]

Well, if you are going to go there, you are better off paying cash for all three, but few of us can. If you are going to balk about not getting a $.30 deduction for each $1 you give your financing company, why would you give them the other $.70?

With those numbers, I would say that is 30% and that is a lot. With many tax returns, each dollar deduction can possibly equate to a dollar added to your return and money back in your pocket. It all helps.

 

[DisneylandGuy22]

Anyone know If Canadian DVC owners can deduct the same as US?