Is renting out points worth it on your taxes?

[mkatsy]

i just tried this simple search and Google AI came up with this, its AI so it must be right. lololololol

So it seems they think they fall under the like trade thinking:

For DVC Rental Store swaps,
there's generally no income tax on the points themselves because it's treated as an even trade for a vacation, not direct cash income, so no 1099 is issued for the swap value. However, if you rent out points for cash, that income is taxable, and you'll receive a 1099 if you earn over $600, requiring you to report it as income, but the swap program avoids this by putting funds toward your trip instead of your bank account.
Key Differences for Swaps vs. Cash Rentals:

• Cash Rental: You get paid, declare it as income (W-9 and 1099 involved if over $600), and pay taxes on it like any other earnings.
• Swap: Points are used for a vacation, treated as an "even trade," and the value isn't considered taxable income; you get a vacation, not cash.

Tax Considerations (General DVC Rental):

• W-9 Form: DVC Rental Store requires this annually for all U.S. members for compliance, even for swaps.
• 1099 Form: Issued for cash rentals over $600, but not for swaps.
• Your Responsibility: It's your duty as the owner to report income if you rent for cash; swaps bypass this by going to a vacation.

In Summary for Swaps: The DVC Rental Store's Point Swap Program offers a tax benefit because it's a non-taxable exchange for a vacation, unlike renting points for cash which creates taxable income.

And from DVRS:

https://dvcrentalstore.com/blog/tips-for-renting-out-dvc-points/

If you are using your rental income for a cruise, a trip to Universal Studios, or beach vacation, consider taking advantage of the DVC Rental Store’s Point Swap Program. Not only will you get a great value for your points and a seamless experience with the help of your Swap Specialist, but there is a tax benefit. While income from a standalone rental is taxable, income from a swap goes right to your vacation. It is considered an even trade, and no 1099 is issued.

Good!! . I take no greater pleasure than watching AI trip over itself. I’ll mark the accountants safe for now.

 

[RivShore]

Good!! . I take no greater pleasure than watching AI trip over itself. I’ll mark the accountants safe for now.

No Kidding!!! But in it's defense, in this case, it just summarized what was on the DVCRS website (AI, please remember I defended you when you start the world wide purge. Thank You. )

 

[RivShore]

@pkrieger2287 just posted a blog on taxes at DVC Fan.

https://dvcfan.com/renting-dvc-points/do-i-have-to-pay-taxes-when-renting-my-dvc-points/

Paul, you did not address swaps, can you add that to your blog (or here)? Thanks!

 

[Sandisw]

The mouse definitely wins, especially when you swap for cruises in their system.

I don't think you have read what I have been saying. Someone else had said that they are just doing the bare minimum to just not issue 1099s. I agree with you that just because you don't give a 1099 doesn't mean that it's not taxable.

I have been saying that the third party swaps are close enough to the first party swaps to be considered in the same non-taxable exclusion to the normal barter rules.

Disney doesn't have a unique ability or a special deal with the IRS to get around taxes. If they are able to do a swap or make a contract that can get around the taxability of a situation, another company would also be able to do something similar to get around the same tax loopholes/provisions.

I have read that and it’s why I said they are not similar at all for tax purposes

With the DVC exchange, Disney owns the cruise room that they are trading with me for my DVC room.

It’s a true barter situation.

With the cruise swap, the owner of the cruise room, whether it’s Disney or Royal, is not party to the barter…

And, the broker is not an owner of the cruise room so they can’t barter a cruise room.

So, the owner is not bartering anything with the cruise line.

That owner is paying cash for their room by renting their room to someone and then using the cash to pay for the cruise…the only difference is they are allowing the broker to pay the cruise directly on their behalf.

It would be like saying I bartered with my hair dresser if I sell something to a friend and instead of having the friend pay me directly they send the money to the hairdresser.

Which is why I don’t agree with your assessment that the two situations are in anyway related for tax purposes.

ETA: Now, whether the fact that the broker can qualify this as a non taxable event to not trigger the 1099?

Only the IRS decides that so my opinion it’s questionable is only important to me…and I would not do the cruise swap without including it in my taxes as a net sum zero.

 

[Former DVC Owner]

I rented my points numerous times and had no idea I was supposed to put it on my taxes. Now I have guilt!

 

[Brianstl]

Actually points are not used to rent the room for cash at all via the DVC exchange program.

That’s the whole point for me…it’s not even close to the same thing.

We can agree to disagree. An exchange program via DVC is not the same thing as a owner renting out a reservation and using the cash to pay for a cruise…even if the broker holds the cash for the owner and makes the payment on their behalf.

It is actually whatever the IRS wants to consider it. The IRS has decided to overlook exchanges with Disney to this point. Under the current rules it technically doesn't matter what Disney does with the points. What matters is the fair market value of what you have received be it a cruise, pass, etc. for exchanging your points. That is considered income.

https://www.irs.gov/taxtopics/tc420

 

[Sandisw]

It is actually whatever the IRS wants to consider it. The IRS has decided to overlook exchanges with Disney to this point. Under the current rules it technically doesn't matter what Disney does with the points. What matters is the fair market value of what you have received be it a cruise, pass, etc. for exchanging your points. That is considered income.

https://www.irs.gov/taxtopics/tc420

When you buy DVC direct, you pay for the use of your points at DVC resorts AND through the exchange programs.

So, using them for DVC or other options is exactly the same thing from a legal and taxable situation.

Your contract with DVC is for more than just DVC rooms.

That is the point. If exchanges count, then why doesn’t an owner who exhanges their points for a different DVC room that is less value than their trade owe taxes on it?

BVTC is an exchange program, is it not?

Technically, within DVC, the more I think about it , it probably shouldn’t even be referred to bartering at all because you paid for the use of all those options when you signed your contract.

 

[Phatscott25]

Technically, within DVC, the more I think about it , it probably shouldn’t even be referred to bartering at all because you paid for the use of all those options when you signed your contract.

This. When you buy direct, you're given a portfolio of point charts. Your home resort, other dvc at 7 months, cruises, hotel collections, etc. No "swap" or anything. Just, "here's your charts, use as you please." Definitely not the same as a 3rd party swap.

 

[mkatsy]

It is actually whatever the IRS wants to consider it. The IRS has decided to overlook exchanges with Disney to this point. Under the current rules it technically doesn't matter what Disney does with the points. What matters is the fair market value of what you have received be it a cruise, pass, etc. for exchanging your points. That is considered income.

https://www.irs.gov/taxtopics/tc420

as everyone else has mentioned, keep in mind that Disney is the original merchant. When the direct points were purchased Disney declared the income on the revenue they received from you, or whoever the original buyer was. In the exchange program that is detailed in the sales contract, you have the option to choose an alternate item instead of a room. No new value is added, it’s just a fulfillment of your annual allocation, so there is nothing to tax.

 

[Tatebeck]

Sorry for the delay in response, we have been enjoying the Polynesian Island Tower!

Now back to the topic, that is just not how contracts and taxes work. You cannot simply contract your way around taxes unless there is a specific loophole you are using. Otherwise, once again everyone would just make or join a barter exchange using fake points with a contact that says they can exchange for whatever they want. It simply doesn't work like that.

For DVC points the only thing that you get guaranteed in your contracts is the right to use your ownership/points to stay at that resort. That is it. Everything else are extras that Disney says themselves are exchanges and that they could go away or change at any time. Simply having DVC offer an exchange to you does not make it tax free. It is only tax free if it is a close enough exchange to be considered an exchange of similar services on a noncommercial basis. (Non commercial for you as the trader, DVC or a third party can make money on your points if they wish, but then they are taxed on that income)

If in some way you as the trader are trying to make money off of an exchange (IDK how, this is theoretical), then it would fall under normal barter rules and be taxable again for you.

If for some reason DVC decided to offer physical goods, let's say a Car, for exchange for your points, that would clearly not be similar services exchanged and would fall under normal barter rules IMO according to IRS rules even though it would be an exchange through DVC that they said they may offer in your contracts.

Heres an example that proves it is not the contract but what is exchanged that matters. You know what your contract specifically says that you can do besides use your points at your resort? It says that you can occasionally rent points out. And if you do rent out your points, the money you receive is not 100% tax free, even though it is in your contract that you can do that with your points. The contract does not matter to the IRS.

So in conclusion, it is NOT the fact that a direct exchange is part of DVCs official programs that makes it a tax free exchange. It is the fact that you are trading something that you have already paid for in exchange for something close enough to what you traded that it is considered swapping similar services and if noncommercial it does not incur taxes.

IMO This is why the other swaps can do the same thing, even if they are not apart of the original contracts with DVC themselves.

 

[mkatsy]

Sorry for the delay in response, we have been enjoying the Polynesian Island Tower!

Now back to the topic, that is just not how contracts and taxes work. You cannot simply contract your way around taxes unless there is a specific loophole you are using. Otherwise, once again everyone would just make or join a barter exchange using fake points with a contact that says they can exchange for whatever they want. It simply doesn't work like that.

For DVC points the only thing that you get guaranteed in your contracts is the right to use your ownership/points to stay at that resort. That is it. Everything else are extras that Disney says themselves are exchanges and that they could go away or change at any time. Simply having DVC offer an exchange to you does not make it tax free. It is only tax free if it is a close enough exchange to be considered an exchange of similar services on a noncommercial basis. (Non commercial for you as the trader, DVC or a third party can make money on your points if they wish, but then they are taxed on that income)

If in some way you as the trader are trying to make money off of an exchange (IDK how, this is theoretical), then it would fall under normal barter rules and be taxable again for you.

If for some reason DVC decided to offer physical goods, let's say a Car, for exchange for your points, that would clearly not be similar services exchanged and would fall under normal barter rules IMO according to IRS rules even though it would be an exchange through DVC that they said they may offer in your contracts.

Heres an example that proves it is not the contract but what is exchanged that matters. You know what your contract specifically says that you can do besides use your points at your resort? It says that you can occasionally rent points out. And if you do rent out your points, the money you receive is not 100% tax free, even though it is in your contract that you can do that with your points. The contract does not matter to the IRS.

So in conclusion, it is NOT the fact that a direct exchange is part of DVCs official programs that makes it a tax free exchange. It is the fact that you are trading something that you have already paid for in exchange for something close enough to what you traded that it is considered swapping similar services and if noncommercial it does not incur taxes.

IMO This is why the other swaps can do the same thing, even if they are not apart of the original contracts with DVC themselves.

I’m at a loss as to how explain this to you any differently. This is not two strangers that met on the internet, that want each others stuff. This is a store selling a product to their customer. They ONLY offer this service to their customers. You can’t bring them Marriott points and leave with a Disney cruise. The IRS has stated that they don’t give a hoot what item a merchant gives their customers… literally Disney could give you condoms from the gift shop … as long as the customer and the store are in agreement that value is exactly what the customer paid and not a penny more.

 

[Tatebeck]

I’m at a loss as to how explain this to you any differently. This is not two strangers that met on the internet, that want each others stuff. This is a store selling a product to their customer. They ONLY offer this service to their customers. You can’t bring them Marriott points and leave with a Disney cruise. The IRS has stated that they don’t give a hoot what item a merchant gives their customers… literally Disney could give you condoms from the gift shop … as long as the customer and the store are in agreement that value is exactly what the customer paid and not a penny more.

You don't have to explain it any other way. It is simply incorrect from everything I have seen from the IRS unless you have a source that says you can barter whatever goods and services and as long as they are equal value there are no tax implications. Sorry but I do not believe that exists, or at least I have been looking for it and have been unable to find it. I wish that was actually true because then I could barter away to my hearts content and avoid excess taxes. So please provide the IRS guidance if you have it. I am being 100% serious here.

For swaps and barters you aren't buying anything. You have already bought something and later are choosing to exchange or swap that for something different. And yes it does matter what you are swapping in order to meet certain rules, otherwise they could consider it a gain if you are trading for a completely different product or service that is worth more than you originally paid for what you are trading.

And yes they in general will take your net value agreement unless it is obviously a lie. But just because the value is equal doesn't mean that it is tax free. You can't just trade whatever you want as you are saying. Unless it meets certain stipulations you would have to apply your costs for what you purchased when you purchased it vs the value of what you received when you received it, possibly resulting in capital gains as if you had sold it.

It requires other sections to be applied to be tax neutral such as a "similar exchange on a noncommercial basis."

https://www.irs.gov/publications/p525#en_US_2024_publink1000229343
"Miscellaneous Income
This section discusses various types of income. You may have taxable income from certain transactions even if no money changes hands. For example, you may have taxable income if you lend money at a below-market interest rate or have a debt you owe canceled.

Bartering
Bartering is an exchange of property or services. You must include in your income, at the time received, the FMV of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as FMV unless the value can be shown to be otherwise. Generally, you report this income on Schedule C (Form 1040). However, if the barter involves an exchange of something other than services, such as in Example 23, later, you may have to use another form or schedule instead."

 

[mkatsy]

You don't have to explain it any other way. It is simply incorrect from everything I have seen from the IRS unless you have a source that says you can barter whatever goods and services and as long as they are equal value there are no tax implications. Sorry but I do not believe that exists, or at least I have been looking for it and have been unable to find it. I wish that was actually true because then I could barter away to my hearts content and avoid excess taxes. So please provide the IRS guidance if you have it. I am being 100% serious here.

For swaps and barters you aren't buying anything. You have already bought something and later are choosing to exchange or swap that for something different. And yes it does matter what you are swapping in order to meet certain rules, otherwise they could consider it a gain if you are trading for a completely different product or service that is worth more than you originally paid for what you are trading.

And yes they in general will take your net value agreement unless it is obviously a lie. But just because the value is equal doesn't mean that it is tax free. You can't just trade whatever you want as you are saying. Unless it meets certain stipulations you would have to apply your costs for what you purchased when you purchased it vs the value of what you received when you received it, possibly resulting in capital gains as if you had sold it.

It requires other sections to be applied to be tax neutral such as a "similar exchange on a noncommercial basis."

https://www.irs.gov/publications/p525#en_US_2024_publink1000229343
"Miscellaneous Income
This section discusses various types of income. You may have taxable income from certain transactions even if no money changes hands. For example, you may have taxable income if you lend money at a below-market interest rate or have a debt you owe canceled.

Bartering
Bartering is an exchange of property or services. You must include in your income, at the time received, the FMV of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as FMV unless the value can be shown to be otherwise. Generally, you report this income on Schedule C (Form 1040). However, if the barter involves an exchange of something other than services, such as in Example 23, later, you may have to use another form or schedule instead."

“If you exchange services with another person” does NOT include the person that sold you the item. That’s a random third person you encountered after your purchase, who was NOT a part of the sale that got you the thing. Any exchanges between the merchant and the customer are considered an extension of the original sale.

 

[Genie+]

The term "barter exchange" doesn't include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis (for example, a babysitting cooperative run by neighborhood parents).

^ As a layperson, I’m just trying to understand what the underlined are meant to convey.

How does an exchange become formal or informal? What part(s) needs to be non-commercial?

2 professional trading different services - no.

2 non-professionals trading same service - ok.

 

[Tatebeck]

“If you exchange services with another person” does NOT include the person that sold you the item. That’s a random third person you encountered after your purchase, who was NOT a part of the sale that got you the thing. Any exchanges between the merchant and the customer are considered an extension of the original sale.

The DVC contracts do not include any rights to exchanges and the exchanges are NOT a part of the sale either, they just give you them as extra options after you purchase. But the exchanges are explicitly not part of the original contracts. They simply only give the options to those who have bought direct from them (or before they changed their rules).

The only thing contractually guaranteed is for using your points to stay at your DVC resort. So yes you are trading with the company who sold you the thing, but afterwards in a separate transaction.

 

[mkatsy]

The only thing contractually guaranteed is for using your points to stay at your DVC resort. So yes you are trading with the company who sold you the thing, but afterwards in a separate transaction.

Good … the IRS states that when these two transactions occur between the same two parties, for the purpose of taxation, you are allowed to treat it as one continuous transaction. And that is why no tax is due

 

[Sandisw]

You don't have to explain it any other way. It is simply incorrect from everything I have seen from the IRS unless you have a source that says you can barter whatever goods and services and as long as they are equal value there are no tax implications. Sorry but I do not believe that exists, or at least I have been looking for it and have been unable to find it. I wish that was actually true because then I could barter away to my hearts content and avoid excess taxes. So please provide the IRS guidance if you have it. I am being 100% serious here.

For swaps and barters you aren't buying anything. You have already bought something and later are choosing to exchange or swap that for something different. And yes it does matter what you are swapping in order to meet certain rules, otherwise they could consider it a gain if you are trading for a completely different product or service that is worth more than you originally paid for what you are trading.

And yes they in general will take your net value agreement unless it is obviously a lie. But just because the value is equal doesn't mean that it is tax free. You can't just trade whatever you want as you are saying. Unless it meets certain stipulations you would have to apply your costs for what you purchased when you purchased it vs the value of what you received when you received it, possibly resulting in capital gains as if you had sold it.

It requires other sections to be applied to be tax neutral such as a "similar exchange on a noncommercial basis."

https://www.irs.gov/publications/p525#en_US_2024_publink1000229343
"Miscellaneous Income
This section discusses various types of income. You may have taxable income from certain transactions even if no money changes hands. For example, you may have taxable income if you lend money at a below-market interest rate or have a debt you owe canceled.

Bartering
Bartering is an exchange of property or services. You must include in your income, at the time received, the FMV of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as FMV unless the value can be shown to be otherwise. Generally, you report this income on Schedule C (Form 1040). However, if the barter involves an exchange of something other than services, such as in Example 23, later, you may have to use another form or schedule instead."

So then you belive that exchanging to other resorts vs BVTC create a tax liability?

Which would mean the DVC resort agreement would not be part of the contract?

 

[Tatebeck]

So then you belive that exchanging to other resorts vs BVTC create a tax liability?

Which would mean the DVC resort agreement would not be part of the contract?

No I don't.

But NOT just because you are exchanging with Disney as a lot of other here do. But because you as a member are exchanging a very similar good/service noncommercially, which has an exception to the barter/barter exchange rules.

That is the hardest example by far because they both are even using DVC points, one is home resort vacation points and the other is bvtc vacation points. And because the system just converts for you back and forth within the system instantly under the hood. So if you don't read the contracts and rules you may not even realize that it is a type of exchange! Super interesting stuff

Good … the IRS states that when these two transactions occur between the same two parties, for the purpose of taxation, you are allowed to treat it as one continuous transaction. And that is why no tax is due

Ahh interesting do they really?
But do you have a source besides just "trust me bro" like it seems right now?

Please can you post what you are using for this opinion? Because I think you may be stretching it quite a bit as this is a very strange instance. It's not like a car where you are trading in the entire thing back to the dealership. You maintain ownership and instead just sign over the right to use for a single trip so it is not like a full trade in like a vehicle if you are using something like that.

 

[TDK44]

@Tatebeck what do you do for a living?

 

[Tatebeck]

@Tatebeck what do you do for a living?

Not taxes if that is your real question


I think(?) I said that much earlier I'm the thread. I'm not a tax guy, just someone who has looked a lot into the swaps and taxability possibility and posting the relevant IRS sources