Is renting out points worth it on your taxes?

[AnnaKristoff2013]

The point swap is not questionable! We point swap within dvc for cruises too and don’t pay taxes. I’ll never understand why people want to pay more taxes than they have too. You’ve already paid taxes on that money at a highway robbery level. It’s called income tax. It’s called sales tax. It’s called property tax. Good grief, people, don’t you realize how much money the government already steals from you?

The above is terrible tax advice.

 

[Moonspinner]

The above is terrible tax advice.

Amazing how you didn’t actually address my point and just slagged me. Well, I hope you’re paying taxes when you do anything with your points with Disney as well lol. And make sure the federal government knows every step you take today while you’re at it.

 

[airjay75]

Ask the broker telling you it’s not taxable if they’ve obtained an opinion of counsel on whether the point swap is taxable and you might see just how questionable it is.

Now, whether a transaction is taxable and whether the IRS knows about it or will ever find out about it if you don’t report the income are two very different questions. There are many, many transactions people engage in all the time that are taxable but for which there is no information reporting obligation (or the obligation is simply ignored) and so the income escapes the tax system. That would give some people comfort ignoring any tax consequences associated with a points swap or even with occasional rental income that didn’t generate a 1099. Others are rule followers through and through. YMMV.

Signed, someone who may or may not be a practicing tax lawyer .

 

[AnnaKristoff2013]

Amazing how you didn’t actually address my point and just slagged me. Well, I hope you’re paying taxes when you do anything with your points with Disney as well lol. And make sure the federal government knows every step you take today while you’re at it.

Good grief, people, don’t you realize how much money the government already steals from you?

I mean, the above “point” doesn’t need to be addressed because there isn’t an actual point you made other than generally complaining about having to pay taxes. I will stop responding to you at this point though so feel free to have the last word.

 

[atthebeachclub]

I am not a lawyer; merely a lowly citizen who has read some of the IRS’ tax guidance documents. I am pretty positive point swaps are a taxable event, even if you don’t receive tax documents from the swapper.

None of us love paying taxes, especially when you feel the money is not managed to your liking, but how you feel about it doesn’t change the law.

 

[AnnaKristoff2013]

I am not a lawyer; merely a lowly citizen who has read some of the IRS’ tax guidance documents. I am pretty positive point swaps are a taxable event, even if you don’t receive tax documents from the swapper.

None of us love paying taxes, especially when you feel the money is not managed to your liking, but how you feel about it doesn’t change the law.

I am a lawyer (although I don’t practice in that field) and I agree that it certainly seems likely to be a taxable event. Will anyone ever get dinged on an audit because they failed to report it? Probably not. Doesn’t change the fact that it probably still is.

 

[AstroBlasters]

The point swap is not questionable! We point swap within dvc for cruises too and don’t pay taxes. I’ll never understand why people want to pay more taxes than they have too. You’ve already paid taxes on that money at a highway robbery level. It’s called income tax. It’s called sales tax. It’s called property tax. Good grief, people, don’t you realize how much money the government already steals from you?

The propaganda in this post…..

 

[Brian Noble]

Others are rule followers through and through. YMMV.

That's one reason. Another is that some folks believe in the social compact that a tax system represents.

 

[airjay75]

That's one reason. Another is that some folks believe in the social compact that a tax system represents.

“Taxes are the price we pay for a civilized society.” — Justice Oliver Wendell Holmes

I’m generally on board, but also a little jaded by all my years seeing the sausage of tax law being made and administered.

 

[Anal Annie]

Have you thought about doing a swap?

https://dvcrentalstore.com/members/swap-your-dvc-points-for-an-amazing-vacation/

I am going to look into that idea as soon as I get a few extra minutes to research it and contact them about it. Thx

 

[Anal Annie]

Just noting that being pushed into the next tax bracket, in and of itself, is not really a bad thing. You’ll only be taxed at that rate on your income that goes above the amount that pushed you into that bracket. It’s not like ALL of your income is now suddenly subject to a higher tax rate.

That said, there are any number of things for which your income matters. Some credits and deductions are phased out once you get to certain income levels. There are governmental benefits tied to your income level and sometimes just a few more thousand dollars of income can disqualify you from those.

Here what I would do if I were you. Don’t worry about the expenses that you’ll be able to use to offset some of the rental income. You can figure that out later and your tax software can help guide you through that. Take the gross amount of income you expect to receive from renting out your points and ask yourself the question - if I had had that much more income this past year, what would the consequences have been? You could even do it this year when you fill out your taxes. Now, there are some changes in tax laws going into effect this year that could mess with that calculation (e.g., new floor on deductions for charitable contributions), but I think that will give you a rough estimate and hopefully help you decide whether renting out points is right for you.

I used to have a little side gig that was 1099 based and it was always just enough income to mess us up on our taxes and we always owed while I was doing it so I dropped it so we wouldn't always be in that situation. It just wasn't worth the extra hassle. DH would be ticked if I created that situation again.

 

[Brian Noble]

t was always just enough income to mess us up on our taxes and we always owed while I was doing it

Were you paying Estimated Taxes along the way? I have an on-again/off-again consulting business, and as long as I am keeping track of my estimates at least reasonably closely, I don't have to write a big check in April for the prior year.

2025 will be the litmus test for whether or not I got it right. I paid based on what I earned at the margin each quarter* rather than four equal amounts, and naturally the business was back-loaded in 2025. So I will have to figure by annualized income installments to avoid penalties. I could have gone the safe harbor route instead, but last year was a flush year, so I worried that would almost certainly have been a significant overpayment.

 

[drusba]

Thanks. But now I'm completely confused. I need to consider our annual DUES too? Uggg. My brain doesn't do math very well. We don't even own that many points. I just thought renting out a year or so of points would be a good way to get some extra cash and that this trip would be easier to plan on cash. Now I definitely feel like it's too complicated to bother with.

It is fine if you want to avoid those tax hassles. You may want to look further into the suggestion of a point swap made by DebbieB. I do not know the actual answer to the tax question for that, but it raises an interesting issue that a CPA or a tax lawyer may be able to answer. If by point swap, they are talking about your transferring your points to another member, then an interesting question arises as to whether that is a taxable event because of what is expressly provided in the POS of every DVC Resort. All declare that points themselves have no monetary value because they are merely symbols of your ownership interest which has value, and one cannot transfer points to another for any compensation because they have no monetary value. Thus, your act of transferring points is an event that by POS definition provides no income, and if you are then provided some reservation elsewhere, that event might arguably be treated as a non-income gift.

 

[Anal Annie]

Were you paying Estimated Taxes along the way? I have an on-again/off-again consulting business, and as long as I am keeping track of my estimates at least reasonably closely, I don't have to write a big check in April for the prior year.

2025 will be the litmus test for whether or not I got it right. I paid based on what I earned at the margin each quarter* rather than four equal amounts, and naturally the business was back-loaded in 2025. So I will have to figure by annualized income installments to avoid penalties. I could have gone the safe harbor route instead, but last year was a flush year, so I worried that would almost certainly have been a significant overpayment.

No, I wasn't paying quarterly estimates because it was such a passive form of income where I might only make $100 one month or I might make a few hundred. And sometimes the minimum amount for payouts weren't met until the next month. I just know the 1099 thing didn't work out so well for us. Better off not having to mess with it.

 

[Sandisw]

It is fine if you want to avoid those tax hassles. You may want to look further into the suggestion of a point swap made by DebbieB. I do not know the actual answer to the tax question for that, but it raises an interesting issue that a CPA or a tax lawyer may be able to answer. If by point swap, they are talking about your transferring your points to another member, then an interesting question arises as to whether that is a taxable event because of what is expressly provided in the POS of every DVC Resort. All declare that points themselves have no monetary value because they are merely symbols of your ownership interest which has value, and one cannot transfer points to another for any compensation because they have no monetary value. Thus, your act of transferring points is an event that by POS definition provides no income, and if you are then provided some reservation elsewhere, that event might arguably be treated as a non-income gift.

The point swap program has the owner still renting a reservation but the broker doesn’t send the money to the owner…they use it to book a cruise, etc.

It’s because the money never goes to the owner, the broker doesn’t send a 1099.

 

[airjay75]

It is fine if you want to avoid those tax hassles. You may want to look further into the suggestion of a point swap made by DebbieB. I do not know the actual answer to the tax question for that, but it raises an interesting issue that a CPA or a tax lawyer may be able to answer. If by point swap, they are talking about your transferring your points to another member, then an interesting question arises as to whether that is a taxable event because of what is expressly provided in the POS of every DVC Resort. All declare that points themselves have no monetary value because they are merely symbols of your ownership interest which has value, and one cannot transfer points to another for any compensation because they have no monetary value. Thus, your act of transferring points is an event that by POS definition provides no income, and if you are then provided some reservation elsewhere, that event might arguably be treated as a non-income gift.

Not a bad crack at the sort of argument many have made before to the IRS or a judge. But, I can assure you it is still a taxable transaction.

One, income earned from something that is illegal or that is otherwise in violation of a contract is still income. It is a basic principle anyone taking a federal income course in law school will learn.

Two, even if you want to take the position that the points have a zero value, you are still being paid for something. The easiest way to characterize it would say you’re being paid to perform the service of calling MS and having the points transferred. And that’s actually a worse tax answer because that means you will be subject to tax on the full gross amount received, not just the difference between the amount received and your expenses (I.e., your dues).

I haven’t thought about whether paying someone money for a points transfer triggers a 1099 reporting obligation on the part of the person paying for the transfer. It probably does if it is over $600. Of course, one of those many things in our economy that escapes information reporting even if required.

 

[Phatscott25]

I know this is not a popular take around here, but I am not convinced that any of the various brokers are correct when they claim point swaps are not taxable events. They won't generate a 1099 for them, but that's not the same thing.

You are correct. The market value of whatever is received on the exchange would be the revenue in this instance, regardless of whether a 1099 is received. As others have pointed out, would the IRS find out? Most likely not, but that doesn't make it "tax free."

 

[Sandisw]

You are correct. The market value of whatever is received on the exchange would be the revenue in this instance, regardless of whether a 1099 is received. As others have pointed out, would the IRS find out? Most likely not, but that doesn't make it "tax free."

To add, people who rent points on their own do not get a 1099…but they still are required to claim on taxes.

 

[Anal Annie]

The point swap program has the owner still renting a reservation but the broker doesn’t send the money to the owner…they use it to book a cruise, etc.

It’s because the money never goes to the owner, the broker doesn’t send a 1099.

Ahhh. That makes sense. TY for the explanation!

 

[davidhr]

The swap is like asking your employer to not give you a paycheck each month. Instead you’re going to provide them a grocery list and they can get you groceries instead for the same amount. You’re swapping your time and labor for groceries, not money. In that case you don’t have to pay taxes! Right?… Right?!!