Tax Implications

[rwodonnell]

Given the time of year, I'm surprised not to have seen anything on taxes and DVC. I am in the middle of TurboTax! I assume I can deduct the real estate taxes that are part of the dues. Can I also deduct the interest paid on the loan? We financed through Disney - I'm sure it wasn't the most cost-effective solution, but it was easy!

 

[Candlelady]

As far as I understand, yes you can. I did and the IRS hasn't come after me yet!

Don't ya love Turbo Tax? I used to sweat it out for 2 days figuring out my taxes, now I can get them done in less than 3 hrs with TurboTax. I even get them done in Feb instead of April 14th!

 

[rwodonnell]

Yes, TurboTax rocks! Except for this question, the whole process only took about 2 hours, and some of that was complaining.

 

[AEN]

As this is the last day of tax season for me, I hope this is the last tax question that I answer . Generally, the real estate taxes are deductible as an itemized deduction. Also, the interest, if paid to Disney or through other real estate secured instruments (i.e. home equity, refinance of primary residence with additional proceeds) are generally deductible as an itemized deduction. There can be limitations. That is why I keep saying "generally".

Good luck.

 

[mbhoxsie]

We've always deducted the paid interest on our loan...

I doublechecked with my tax preparer this year, and she verified that we could also deduct the property tax portion of our dues... (At least in the State of Michigan...)

This, of course, immediately prompted me to convince the DW that we needed another deduction, and that it was time for an add-on...

 

[kda]

Boy, the way I read Turbo Tax's instructious and helpful hints about deducting interest on a 'vacation home', we had to reside there for 14 days a year, and we don't do that. So I only deducted the property tax.
Anyone else? [I know this isn't a tax advice board and won't make any final decisions based on comments posted here.]

 

[rwodonnell]

Originally posted by kda
Boy, the way I read Turbo Tax's instructious and helpful hints about deducting interest on a 'vacation home', we had to reside there for 14 days a year, and we don't do that. So I only deducted the property tax.
Anyone else? [I know this isn't a tax advice board and won't make any final decisions based on comments posted here.]

That's the way I read it at first too, so I looked into it more. A friend of mine who is also an accountant and owns DVC (he's the one who talked me into it!) claims it is. His argument is based on two things: first, the loan just has to be based off your primary home or secondary home (ie. as collateral), and the language used in the tax booklet for the 1040 seems to support that - I think TurboTax's interview is misleading there. Second, and this is a weak one, he figures they wouldn't send us the 1098 if it weren't deductible.

 

[mbhoxsie]

Boy, the way I read Turbo Tax's instructious and helpful hints about deducting interest on a 'vacation home', we had to reside there for 14 days a year, and we don't do that. So I only deducted the property tax.

This is just a thought, but couldn't you reside there over 14 days a year in if you stayed at an OKW studio during the slow season?

Since DVC doesn't have set weeks and is more flexible than traditional timeshares, I'm not sure how the 14 day rule would be applicable.

 

[Frozenfingers]

A thought you might consider.. using a home equity loan to pay off DVC. Not only are the interest rates at around 5% (at least at my bank), but there is absolutely NO question the interest is deductable.

Last week when we were down in WDW we were looking for undeveloped property (and ended up buying at DVC).. anyway, my thought was if I purchased property we could write off portions of our expense to "visit" our investment. Does anyone have any info or sources to check this loophole? and does it apply to deeded vacation properties?

 

[SAKPEG99OKW]

Just an fyi, DW and I use H&R Block, and we have deducted our interest and property taxes for three years. Never had a problem. I am not sure if DVC is catorgized as a vacation home or just a second property?

Scott