Possible delicate cost questions?

[CrzyforPiglet]

DH & I went to a DIS meet this weekend with some true DVC believers. We got more information than we ever have and are now seriously considering taking the plunge. Right now it is just the 2 of us - but expect to start a family in the next year and enjoy going to WDW. We do not currently own a home but are renting an apartment and will probably buy next year. But costwise we could probably but 50% down on DVC and finance the rest. So here is the question . . .

We know the basic cost for 150 points through Disney is 12,600, there are also annual dues, but does owning DVC affect your taxes? I mean if there is a deed and mortgage then it is considered real estate, isn't it? We've only filed basic tax returns so this would be new to us but I just want to make sure we have all costs considered before buying into DVC and that is the only thing I can't figure out?

Any help would be greatly appreciated!

 

[Terry S]

CrzyforPiglet... I really don't have the answer to your questions, but just thought I would say Hi! I am assuming you were talking about Kam's meet. I am sorry I missed it, would have loved to meet a bunch of DISer's and WISHer's. I am a DVC member at the Beach Club Villas and I love it! Good Luck with your decision, I am sure someone else will answer you tax question.

 

[PamOKW]

You should always consult with a tax expert but basically, DVC has two tax advantages. If you finance through DVC or get a mortgage from a bank, you can deduct the interest that you pay. Also, the portion of our dues (it is only a small portion) that is real estate tax can also be deducted.

 

[new_yawka]

I am not an accountant, but I know some accountants are comfortable with deducting both the interest on the mortgage and the portion of the dues (generally about 20%) which represents property taxes paid on the DVC property.

 

[Caskbill]

Keep in mind that the interest deduction and real estate taxes paid are deductible on your income taxes ONLY if you Itemize your deductions on your return.

If you take the standard deduction, then the above items are not deductible. Since you are currently renting an apartment you are probably not paying any real estate taxes or mortgage interest at present. These are the two items that generally help people itemize more than the standard deduction, along with contributions, possibly medical expenses, taxes etc.


Last year the standard deduction for a married couple filing jointly was $7850. This means that on Schedule A of your return you would have to come up with more than $7850 in itemized deductions before DVC (or any other deductions) become truly deductible on your taxes. (That is, reduce your taxes more than what the standard deduction will).

 

[Ralph&Pam]

Since the OP appears to be concerned about potential added costs due to taxes, note that there are no negative consequences of the mortgage interest and real estate taxes on a timeshare like DVC. If you are able to itemize deductions to your benefit (this becomes most likely after you purchase a principal residence with its own mortgage and taxes), the interest and taxes on a timeshare are also deductable for income tax purposes (under tax provisions for a "second home", I believe, but I am not a qualified tax advisor or accountant so YMMV). If your itemized deductions would be less than the standard deduction because you do not have the benefit of such deductions, use the standard deduction instead. You are not obligated to itemize simply because you have incurred itemizable deductions. Choose whichever works best for you in a particular tax year. As I see it, the (small) additional itemized deductions for the real estate taxes and possibly for mortgage interest can have positive tax consequences (reducing taxes) but should not have negative consequences (increasing taxes) in any case.

Ralph

 

[CrzyforPiglet]

Thanks everyone for your responses - my main concern was any other "hidden costs" to DVC ownership so it's good to hear there isn't but it's also great do know that maybe a year or so down the line when we do buy a house that we might have another option of deductions for our taxes. I didn't realize that part of the dues covered real estate taxes so that clarifies things there too.

Hopefully we'll become "home owners" soon!!