Is renting out points worth it on your taxes?

[Anal Annie]

We are considering renting out some of our points for the first time in the next year or so in order to use the cash for a trip to the asian parks. I'm concerned about the tax implications though. How do I know if it's really worth raising our taxable income?? (Please don't say to ask your tax preparer - we're strictly TurboTax users and do not pay someone to do them for us!!) Thx for any thoughts. I'm just worried it would throw us into another bracket or something (thereby making not really worthwhile).

 

[AstroBlasters]

We are considering renting out some of our points for the first time in the next year or so in order to use the cash for a trip to the asian parks. I'm concerned about the tax implications though. How do I know if it's really worth raising our taxable income?? (Please don't say to ask your tax preparer - we're strictly TurboTax users and do not pay someone to do them for us!!) Thx for any thoughts. I'm just worried it would throw us into another bracket or something (thereby making not really worthwhile).

There are so many caveats to your question… especially with the new SALT cap…. that no one on a chat board can properly answer it for you.

Why don’t you model it out on turbo tax and see what the implications are.

 

[airjay75]

@AstroBlasters is right - no one can really give you a very good answer without knowing a lot more about your specific tax situation. That said, it also isn't all that complicated either. Your net income (i.e., amounts received after subtracting eligible expenses) from a rental will generally be added to your overall taxable income and you'll owe taxes at the applicable marginal rate in which you find yourself. So, say you're getting $20/point for renting, you paid dues around $9/point, and you're in the 24% tax bracket. So, roughly speaking, you're looking at approximately 24% of $20-$9 being due in federal income taxes, or $2.64/point rented. Of course, there's state tax considerations as well.

 

[AstroBlasters]

@AstroBlasters is right - no one can really give you a very good answer without knowing a lot more about your specific tax situation. That said, it also isn't all that complicated either. Your net income (i.e., amounts received after subtracting eligible expenses) from a rental will generally be added to your overall taxable income and you'll owe taxes at the applicable marginal rate in which you find yourself. So, say you're getting $20/point for renting, you paid dues around $9/point, and you're in the 24% tax bracket. So, roughly speaking, you're looking at approximately 24% of $20-$9 being due in federal income taxes, or $2.64/point rented. Of course, there's state tax considerations as well.

Right…. but depending on their age and how close to certain thresholds they are at it could impact what deductions they are eligible for, Medicare premiums surcharges or ACA subsidies for health care etc, reduce they amount they would do in Roth conversions…. it can get tricky quickly….

 

[muppets3d]

Right…. but depending on their age and how close to certain thresholds they are at it could impact what deductions they are eligible for, Medicare premiums surcharges or ACA subsidies for health care etc, reduce they amount they would do in Roth conversions…. it can get tricky quickly….

All your deductions just determine what rate the rental income is taxed at, it's not really tricky.

 

[Phatscott25]

All your deductions just determine what rate the rental income is taxed at, it's not really tricky.

CPA here. @AstroBlasters is totally correct. Everyone's situation has a lot of variables and there are many thresholds that can be affected beyond just marginal tax rate.

 

[MICKIMINI]

I just TT and have always reported income from a rental. Mine has been taxed at our regular rate. YMMV.

 

[drusba]

What you should do is look into the Schedule E form that you would need to include for your rental income with federal taxes and look for articles discussing rental income and what deductions you may be able to take and include on Schedule E. The issue is not tax brackets but what your actual income will be from rentals. Deductions can include the portion of your operational dues and property taxes applicable to the rental (e.g., if you use 20% of your points, you can possibly deduct from the income 20% of your DVC operational dues and property taxes for the year. Deductions can also potentially include a depreciation expense on the value of your ownership interest. In other words, it is potentially possible that you could make $10,000 in rental income but claim only $1,000 as actual taxable income after expenses.

 

[DebbieB]

Check with https://dvcrentalstore.com. They are also a travel agent. They can rent your points and then book your trip with the funds. It’s called their Points Swap Program, you can avoid taxes.

 

[Anal Annie]

What you should do is look into the Schedule E form that you would need to include for your rental income with federal taxes and look for articles discussing rental income and what deductions you may be able to take and include on Schedule E. The issue is not tax brackets but what your actual income will be from rentals. Deductions can include the portion of your operational dues and property taxes applicable to the rental (e.g., if you use 20% of your points, you can possibly deduct from the income 20% of your DVC operational dues and property taxes for the year. Deductions can also potentially include a depreciation expense on the value of your ownership interest. In other words, it is potentially possible that you could make $10,000 in rental income but claim only $1,000 as actual taxable income after expenses.

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.

 

[Anal Annie]

@AstroBlasters is right - no one can really give you a very good answer without knowing a lot more about your specific tax situation. That said, it also isn't all that complicated either. Your net income (i.e., amounts received after subtracting eligible expenses) from a rental will generally be added to your overall taxable income and you'll owe taxes at the applicable marginal rate in which you find yourself. So, say you're getting $20/point for renting, you paid dues around $9/point, and you're in the 24% tax bracket. So, roughly speaking, you're looking at approximately 24% of $20-$9 being due in federal income taxes, or $2.64/point rented. Of course, there's state tax considerations as well.

You deduct your dues from the net total received for the points? I was unaware of that. I just know with "our luck" that if we received $5 or $6K from renting it would probably be "just enough" to change our tax bracket and throw things off on our taxes. DH would NOT be happy if I messed that up with this plan.

 

[Anal Annie]

Check with https://dvcrentalstore.com. They are also a travel agent. They can rent your points and then book your trip with the funds. It’s called their Points Swap Program, you can avoid taxes.

Thanks. I'll look into that idea too!! I do like the idea of avoiding tax complications. But we own at the step-child resort (SSR) so renting is probably harder to start with.

 

[Brian Noble]

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.

 

[airjay75]

You deduct your dues from the net total received for the points? I was unaware of that. I just know with "our luck" that if we received $5 or $6K from renting it would probably be "just enough" to change our tax bracket and throw things off on our taxes. DH would NOT be happy if I messed that up with this plan.

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.

 

[airjay75]

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.

I looked at this pretty significantly. It is almost certainly a taxable transaction. There simply isn’t any 1099 reporting obligation. Personally, I would not feel any more comfortable not reporting that as taxable income than I would if I rented out in such a manner that I ensured I did not receive a 1099 for the same amount. Of course, I woudn’t lose much sleep about not reporting infrequent and small amounts of rental income that didn’t generate a 1099, but I would if it were larger and more frequent amounts with significant electronic records.

 

[AstroBlasters]

All your deductions just determine what rate the rental income is taxed at, it's not really tricky.

Actually, going over certain thresholds can reduce your SALT deduction from 40k down to 10k.

 

[AstroBlasters]

Thanks. I'll look into that idea too!! I do like the idea of avoiding tax complications. But we own at the step-child resort (SSR) so renting is probably harder to start with.

I’ll redirect back to my original post.

I would recommend using your tax software and modeling in additional rental income over whatever your 2025 income was (adjusting for anything you expect to be different in 2026) to get an idea.

 

[Moonspinner]

We are considering renting out some of our points for the first time in the next year or so in order to use the cash for a trip to the asian parks. I'm concerned about the tax implications though. How do I know if it's really worth raising our taxable income?? (Please don't say to ask your tax preparer - we're strictly TurboTax users and do not pay someone to do them for us!!) Thx for any thoughts. I'm just worried it would throw us into another bracket or something (thereby making not really worthwhile).

Have you thought about doing a swap?

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

 

[AnnaKristoff2013]

It’s called their Points Swap Program, you can avoid taxes.

Questionable.

 

[AnnaKristoff2013]

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.

Agreed.