Renting through broker and 1099

[Bjaiken77]

Hello,

We have a big family trip to Beach Club planned for October. I’m really hoping everyone can make it because we splurged for 9 nights in a two bedroom at Beach Club.

My question: If our group downsizes, we may sell off a portion or the entire week through a rental broker like DVC Rental Store. Last time we did this, we received a 1099 showing it as income.

Question: Is there anything we pay in our dues or contract that legally counteracts the straight income of the 1099? We aren’t making payments, so there is no loan. That will weigh into our decision because a fat 1099 that is untaxed is going to hit us hard at the end of the year.

 

[Sandisw]

The contract does not address any tax liability situations. It simple defines that as owners, we have the right to use our points for ourselves, guests, and renters.

Beyond that, any tax consequences would be based on the IRS laws. And, receiving rental income is required to be reported, which is why a 1099 is issued.

 

[Bjaiken77]

The contract does not address any tax liability situations. It simple defines that as owners, we have the right to use our points for ourselves, guests, and renters.

Beyond that, any tax consequences would be based on the IRS laws. And, receiving rental income is required to be reported, which is why a 1099 is issued.

Interesting…I guess I’ll have to talk to an accountant. Last year, we had a tax preparer, and she threw it in as a source of income and didn’t ask about any other deductions. This year, we’ll be using a family accountant, so whether we hold onto it or not, I guess we stand a better chance of getting solid tax advice. I was just curious if anyone went through something similar. Tax consequences make it not as appealing option as it may seem.

 

[kes601]

Also, selling off part of your week will be harder than you think. MS cannot split reservations for you and once you shorten it to try to do it yourself you aren't 100% assured somebody (or a waitlist) won't grab it before you can re-book the second part.

 

[Bjaiken77]

Also, selling off part of your week will be harder than you think. MS cannot split reservations for you and once you shorten it to try to do it yourself you aren't 100% assured somebody (or a waitlist) won't grab it before you can re-book the second part.

Yeah, that’s a good point. Hopefully it doesn’t come to that and everyone can go. Last year, we went three times, but couldn’t go a fourth (put family member in assisted living). It worked like a charm to sell it, but then I had to pay taxes at the end of the year.

I’m just pointing out how people always say “sell the reservation and buy a cruise with cash.” That seems to be conventional wisdom, which is why we can’t get hurt if people cancel on us. We may just sell and go on DCL. It’s also at the beginning of our use year, so we can cancel altogether. It’d just be a shame to waste a premium reservation.

 

[GoingSince1990]

Instead of splitting the rental, you can shorten it and then rent out the returned points through a broker such as DVC Rental Store. From the rental income you can deduct that year’s operating costs and taxes (not the capital reserve portion of the maintenance fees) on the points you rent; I also take a depreciation deduction (calculated as my total initial cost for the contract divided by the total number of points in the contract over its life). Some posters here disagree with deducting for depreciation, but a DVC contract is inarguably a depreciating asset, when you know with certainty that it will be worth $0 in 2042, and in over 10 years of doing this neither my accountant nor the IRS has ever complained. The key thing to keep the IRS happy is that they want to see that the gross rental income (prior to taking deductions) in your tax return agrees with the number on the 1099.

 

[Bjaiken77]

Instead of splitting the rental, you can shorten it and then rent out the returned points through a broker such as DVC Rental Store. From the rental income you can deduct that year’s operating costs and taxes (not the capital reserve portion of the maintenance fees) on the points you rent; I also take a depreciation deduction (calculated as my total initial cost for the contract divided by the total number of points in the contract over its life). Some posters here disagree with deducting for depreciation, but a DVC contract is inarguably a depreciating asset, when you know with certainty that it will be worth $0 in 2042, and in over 10 years of doing this neither my accountant nor the IRS has ever complained. The key thing to keep the IRS happy is that they want to see that the gross rental income (prior to taking deductions) in your tax return agrees with the number on the 1099.

Thanks! Yeah, I’m not trying to cheat anyone. But this is the type of information I was looking for. Even with the 1099 last year, I just said, “cool…if that’s what we owe on.” However, it made me think about it and wonder if we were smart about it.

Also, I may do a DVC Rental store experience exchange. I’m guessing there would be no 1099 on that since it was a trade. Either way, I hope my family can go and this becomes a non issue. However, I like to know the options. Flexibility is a great part of DVC for us.

 

[_auroraborealis_]

A 1099 just reports the payment. It does not establish the tax liability.

 

[LYSE]

It's standard rental income which means you can write off your expenses to bring down the taxable amount.

So for a Dvc rental think about:
The annual dues on the points
Broker fees, advertising fees, transaction fees etc..
The depreciation mentioned is also quite interesting!

 

[Bjaiken77]

A 1099 just reports the payment. It does not establish the tax liability.

I know. But you’re inviting trouble if it’s not handled correctly. Plus, I just want to do the right thing. My concerns were knowing how people on the boards handle these issues legally and ethically. I got some good things to consider here.

 

[Nursemanit]

Don’t forget Florida Transient tax and state taxes. There are parts of MF that are not deductible like the part that pays reserves. That is the hard part.

 

[Anthony1971]

As others have said you can deduct Property taxes and Maintenance as well as any expenses you may incur from the rental such as advertising fee or a stamp for envelope or a phone call that is an extra charge and not included in all inclusive plans Paypal fees etc. Depreciation is just not allowed for a lot of reasons some read tax law and see one sentence that they can apply but the law is meeting all sentences. The stopping point before many other parts Depreciation only applies to property held as a Business and your contract states points can not be rented as Business.
There is nothing to be afraid of when taking a deduction simply highlight the portions on you dues statement keep the receipts for any other expenses with a note of how it was exactly used and put it with your taxes. Most audits are done by mail and you will simply get a letter asking for proof which you now have easy access to. It is always the taxpayer burden to prove the deduction even if you use an accountant you signed the taxes saying you provided the information used. With that it is unlikely you will get a second look unless there is a way to get 500.00 out of you and that would included penalties and interest so a 300 "mistake" could cost you a lot more. A family member once set what he called a precedent for using his car for work being he had to be at different locations on different which he contractually agreed to making it the normal location. It worked out well for 3 or 4 years until it didn't got a letter and had to pay all the back taxes plus penalties and interest in the end. Should this happen to anyone you can write an apology letter and you will 99% get the penalties refunded but the high interest rate will never be returned.

 

[Genie+]

I’ve only recently paid attention to rental taxes. Warning: Unreliable info to follow

Somewhere I read that if using the rental property for personal use at least 2 weeks, then up to 2 weeks may be rented without needing to report as taxable income. Not sure if or how this applies to DVC. We’d appreciate any clarification here.

 

[Nursemanit]

I’ve only recently paid attention to rental taxes. Warning: Unreliable info to follow

Somewhere I read that if using the rental property for personal use at least 2 weeks, then up to 2 weeks may be rented without needing to report as taxable income. Not sure if or how this applies to DVC. We’d appreciate any clarification here.

The first question in this article explains why that is not likely for DVC type timeshare
https://www.redweek.com/resources/articles/tax-aspects-renting-timeshare

 

[Genie+]

The first question in this article explains why that is not likely for DVC type timeshare
https://www.redweek.com/resources/articles/tax-aspects-renting-timeshare

That helps, thank you!

 

[Sandisw]

The first question in this article explains why that is not likely for DVC type timeshare
https://www.redweek.com/resources/articles/tax-aspects-renting-timeshare

If I own RIV, stay at RIV at least 15 days in a calendar year with my RIV points …which we do…it would seem that if I rent out any extra of those points I might not have to claim.

But, of course, I use them!

 

[Nursemanit]

If I own RIV, stay at RIV at least 15 days in a calendar year with my RIV points …which we do…it would seem that if I rent out any extra of those points I might not have to claim.

But, of course, I use them!

Yes the key is owning more than 3 weeks at the same resort - so 15 days at RIV could allow you to not pay taxes on a 7 day rental if you owned 23 days worth of points.