Mortgage Interest question

[hometech99]

I hit (yuck) the AMT section in TurboTax.
it is saying that a QUALIFIED dwelling is "not used on a transient basis.

i cant find the definition of that. but did see somewhere else that a home qualifies as a personal dwelling if used GREATER than 14 days per tax year.


so, is DVC Mortgage interest NOT deductable for AMT purposes (unless you have enough points to stay at your home resort more than 14 days?)

or could you argue that no matter where you owned, you could use your points to stay in a the smallest room at OKW in the cheapest season , say, a month?


what happens when converting points for use on DCL- would it count as "renting" being you didnt stay in the propert,y and used the value to do something else?

 

[pilferk]

I hit (yuck) the AMT section in TurboTax.
it is saying that a QUALIFIED dwelling is "not used on a transient basis.

i cant find the definition of that. but did see somewhere else that a home qualifies as a personal dwelling if used GREATER than 14 days per tax year.


so, is DVC Mortgage interest NOT deductable for AMT purposes (unless you have enough points to stay at your home resort more than 14 days?)

or could you argue that no matter where you owned, you could use your points to stay in a the smallest room at OKW in the cheapest season , say, a month?


what happens when converting points for use on DCL- would it count as "renting" being you didnt stay in the propert,y and used the value to do something else?

Keep in mind, I got this info from our tax prep accountant. Your situation may differ enough so as to change things.

Our interest on our mortgage IS tax deductable. 200 points, if that matters.

 

[hometech99]

i figure everyone is different- but i was trying to find what the IRS defines as transient.

i know the interest is deductable as far as Form 1098, where you take your normal mortgage interest deduction.

BUT, if you hit AMT, interest on TRANSIENT homes is not deductable (ie someone has a shore house that they spend 5 days out of the year total , with 1-2 days at various times, cant deduct that interest for AMT purposes.)

I only found a mention of "greater than 14 days " one place on irs.gov- so didnt know if thats how they DEFINE transient.

if so, unless you stay ON PROPERTY for GREATER than 14 days per year, the interest isnt deductable for AMT purposes (but is deductable as usual on the regular Mortagage interest deduction form.)

but, i dont know if it IS so.

 

[TMB1203]

My accountant includes DVC on our yearly tax return. We have 200 points, but he's never questioned how long we go or how many points we have.

 

[crisi]

In my experience, hitting AMT increases your chances of audit tremendously. I wouldn't hit "grey areas" of the rules - don't take the deduction and let it sit on the table - it will cost you a lot more to argue it out with the IRS later. Or call a CPA who will battle it for you later.

 

[pilferk]

I hit (yuck) the AMT section in TurboTax.
it is saying that a QUALIFIED dwelling is "not used on a transient basis.

i cant find the definition of that. but did see somewhere else that a home qualifies as a personal dwelling if used GREATER than 14 days per tax year.


so, is DVC Mortgage interest NOT deductable for AMT purposes (unless you have enough points to stay at your home resort more than 14 days?)

or could you argue that no matter where you owned, you could use your points to stay in a the smallest room at OKW in the cheapest season , say, a month?


what happens when converting points for use on DCL- would it count as "renting" being you didnt stay in the propert,y and used the value to do something else?

Ahhh, I got ya.

I've never hit the Alternative Minimum Tax level when itemizing, so.....I can't help.

Honestly, you're probably better off contacting a good tax prep accountant for that question....or calling the IRS help line (and waiting for hours on hold). Unless there's one posting on the DIS, I'm not sure I'd feel confident in taking a posters word for "it"...whatever answer "it" was.

IF I hit AMT, I probably would choose NOT to file myself, and get someone to do my taxes for me. Hitting AMT, from what I've heard, raises your chances for an audit tremendously....I'd want someone making sure all my i's were dotted and t's were crossed.

Of course, it's also April 11th, so.......you may not have much of a choice.

 

[Debbie Jean]

My accountant includes DVC on our yearly tax return. We have 200 points, but he's never questioned how long we go or how many points we have.

Same here for my 150 points.

 

[JimC]

Ahhh, I got ya.

I've never hit the Alternative Minimum Tax level when itemizing, so.....I can't help.

Honestly, you're probably better off contacting a good tax prep accountant for that question....or calling the IRS help line (and waiting for hours on hold). Unless there's one posting on the DIS, I'm not sure I'd feel confident in taking a posters word for "it"...whatever answer "it" was.

IF I hit AMT, I probably would choose NOT to file myself, and get someone to do my taxes for me. Hitting AMT, from what I've heard, raises your chances for an audit tremendously....I'd want someone making sure all my i's were dotted and t's were crossed.

Of course, it's also April 11th, so.......you may not have much of a choice.

If the government does not amend the AMT law it will become a middle class nightmare.

I am not sure that the amount of income tax saved for a property tax deduction on DVC points is worth the effort. The property taxes what 20% to 25% of our dues? The top federal individual income tax rate is 35% with most members probably at a lower marginal rate. Hardly worth worrying over in my view.

 

[crisi]

I think the OP is talking about the mortgage interest deduction, not the property tax. That may be a more significant deduction they are leaving on the table - I'd still leave it on the table.

 

[crisi]

By the way, for everyone giving advice here - the deductability of mortgage interest is dependant on a number of factors - just because you qualify to deduct your DVC mortgage interest, doesn't mean someone else can (I got rid of my mortgage on my primary home because the interest wasn't deductable - yeah, CPAs, technically, that isn't right, my deductions are capped and my other taxes more than cover it), AMT complicates the issue a lot and puts a new set of rules in place. Your accountant is giving you specific advice for you.

That said, when I said "I'd leave it on the table" I mean that "in my cirmstances (I'm a four year vet of AMT), I'd leave it on the table.

 

[pilferk]

By the way, for everyone giving advice here - the deductability of mortgage interest is dependant on a number of factors - just because you qualify to deduct your DVC mortgage interest, doesn't mean someone else can (I got rid of my mortgage on my primary home because the interest wasn't deductable - yeah, CPAs, technically, that isn't right, my deductions are capped and my other taxes more than cover it), AMT complicates the issue a lot and puts a new set of rules in place. Your accountant is giving you specific advice for you.

That said, when I said "I'd leave it on the table" I mean that "in my cirmstances (I'm a four year vet of AMT), I'd leave it on the table.

LOL, that's precisely why I said the following:

"Your situation may differ enough so as to change things."

 

[coloradodad]

As always you should consult your tax advisor, but I do not get the feel that a DVC interest is a transient residence. My limited research indicates that transient alludes to RVs, boats, etc. I think point 3 applies to the DVC interest, but again consult your tax advisor!!

As for the AMT:

1. The property taxes are not deductible for AMT purposes, so if you are in AMT it will not be of any benefit.

2. Interest deduction. For AMT purposes you can only deduct mortgage or home equity loan interest on funds you borrowed to buy, build, or substantially improve your home or a second residence (or on the refinancing of that debt). So, if you claimed a regular tax deduction for interest on a home equity loan that you didn't devote to the home, you would have to add it back in determining AMTI. Also, an adjustment may have to be made to your investment interest deduction in some cases for AMT purposes.

3. Property that is otherwise a qualified residence will not fail to qualify as such solely because the taxpayer's interest in or right to use the property is restricted by a time-sharing arrangement, i.e., an arrangement whereby two or more persons with interests in the property agree to exercise control over the property for different periods during the taxable year.
Reg § 1.163-10T(p)(6).




Disclaimer: Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

[Really_Goofy_Daddy]

My accountant has indicated that the mortgage interest is deductable, the property is a realestate interest, and all the documents are filed in the same manner as a real estate purchase.

Additionally the portion of your dues (break down is available on the members web site) for realestate taxes is also deductable.

This is just some friendly advice, there seems to be some differing opinions here, but after all MY accountant will be sitting next to me if I am audited!

Of course more importantly is the fact that:
THE LARGER THE REFUND = THE MORE POINTS YOU CAN BUY THIS YEAR!

 

[coloradodad]

My accountant has indicated that the mortgage interest is deductable, the property is a realestate interest, and all the documents are filed in the same manner as a real estate purchase.

Additionally the portion of your dues (break down is available on the members web site) for realestate taxes is also deductable.

This is just some friendly advice, there seems to be some differing opinions here, but after all MY accountant will be sitting next to me if I am audited!

Of course more importantly is the fact that:
THE LARGER THE REFUND = THE MORE POINTS YOU CAN BUY THIS YEAR!

Just remember that is your tax return - once in the AMT the whole ball game changes - you still claim the deductions, not arguing that you cannot, they just do not benefit you anymore. Good luck with that refund.

mg

 

[Corgipounce]

To ensure that the interest is tax deductible do one of 2 things either refinance your 1st mortgage on your house and put it in with that, or get a home equity loan. Both allow full deduction of interest and both have a much lower rate than Disney offers.

 

[Budshark]

Everyone has given good advice, so I won't add to that. Just a point of caution about the #1 "gotcha" for deducting DVC interest (especially resale)...

The loan you are deducting interest from MUST be secured by the deed. You cannot take an unsecured personal loan, Credit card loan, or loan of any other type and deduct the interest. Period.

As state, the safest ways to do this are:
1) Home equity type
2) Do it as a standalone mortgage (if you bought enough points to warrant that work)
3) Go through Disney (they hold the Deed as security).

The loans through Timeshare Store (Benchmark) and others are just unsecured loans. This can NOT be deducted - regardless of AMT or not.

Chris

 

[crisi]

To ensure that the interest is tax deductible do one of 2 things either refinance your 1st mortgage on your house and put it in with that, or get a home equity loan. Both allow full deduction of interest and both have a much lower rate than Disney offers.

I got rid of my mortgage (my only mortgage on my primary house) in part because I wasn't getting a deduction for it - a primary mortage "ensures" squat. Now, my tax situation is unusual, but blanket statements about what is and is not deductable are not good.

 

[coloradodad]

I think the real advice should be "consult your tax advisor". That blanket statement should hold, unless your tax professional is not very good....

 

[Really_Goofy_Daddy]

Just remember that is your tax return - once in the AMT the whole ball game changes - you still claim the deductions, not arguing that you cannot, they just do not benefit you anymore. Good luck with that refund.

mg

Agreed!

In reality if you financed, the % of intertest is really small (unless you have a substantial amount of points, which we do not..)

Thanks for your time and sharing your knowledge of the tax law, it is very much appreciated. -RGD

By the way, the refund part was a joke.... I have not seen a substantial refund since I was a teenager... Back when I walked up hill both ways in 2 feet of snow barefoot... you know the routine...

 

[hometech99]

Everyone has given good advice, so I won't add to that. Just a point of caution about the #1 "gotcha" for deducting DVC interest (especially resale)...

The loan you are deducting interest from MUST be secured by the deed. You cannot take an unsecured personal loan, Credit card loan, or loan of any other type and deduct the interest. Period.

As state, the safest ways to do this are:
1) Home equity type
2) Do it as a standalone mortgage (if you bought enough points to warrant that work)
3) Go through Disney (they hold the Deed as security).

The loans through Timeshare Store (Benchmark) and others are just unsecured loans. This can NOT be deducted - regardless of AMT or not.

Chris

so im ok as far as that as Disny holds the mortgage.
i wondered about that- thats why i never shifted the mortgage amount fom them to something else.