Tax writeoff of annual dues

[cbonewjersey]

My guide said that part of the dues are deductible (the part related to property taxes), but a friend of mine, a DVC member for over 10 yrs says he writes off 100% of them, and just adds them to his property taxes when he files. Any comments on what you vets do? I'm newly approved this month so still learning.

 

[Dean]

My guide said that part of the dues are deductible (the part related to property taxes), but a friend of mine, a DVC member for over 10 yrs says he writes off 100% of them, and just adds them to his property taxes when he files. Any comments on what you vets do? I'm newly approved this month so still learning.

UNLESS your friend uses them ONLY as a TRUE investment, there's no way to legally write off the dues thus he's in violation of federal law and asking for IRS trouble. If by chance it truly functions as an investment, he can still likely write off those dues to the level of income he would get on rentals. You can write off interest paid in some cases if you don't own a second home.

I know a lot of people that own vacation condo's which they rent most of the time. When they travel to their condo, they write off air, etc for the trip which is also illegal as I understand it unless the main reason for the trip was supervisory or for repairs to the investment. It's usually for a full week and while they do work while there, it's generally a minor component of their trip.

 

[disneynutz]

You may know people who do all kinds of things, that doesn't make it legal. You might want to contact your tax person or you can take your chances with the IRS.

Bill

 

[CADisneyMom]

I usually do my own taxes since I don't have any write-offs and just take the standard deduction but next year I'm going to go to a tax guy just to see what I can and cannot claim since my daughter is now 19 but she is still a full-time student so I'm thinking I can still claim her as a dependent since she lives at home, and to see if there is anything that I could possibly deduct with DVC. I'm thinking it will just go down to my standard deduction still which I'm totally happy with mind you, makes my life easier at tax time. LOL As for those who are deducting it, I hope it's legal for you because I would hate to see anyone get in trouble with the IRS.

 

[LouisianaDisneyFan]

Hi, I don't know where you are located, so you may or may not be able to deduct. California bills their timeshare taxes to individual owners, so in that case, it MAY be deductible. There's a good article about deductions and other financial matters related to timeshare located here: http://www.tug2.net/advice/TUG_Taxes_and_Timeshares.htm

HTH! Evey =)

 

[cbonewjersey]

some of you sound like its illegal to deduct ANY of the dues. That's not right either. A portion of the dues are property taxes for sure and are deductible. the guide said we get a 1098 each year for interest and taxes. this is a 2nd home with a mortgage and closing costs, so it would make no sense that none of it is deductible. the question is how much of the dues are in play?
thanks everyone.

 

[Dean]

some of you sound like its illegal to deduct ANY of the dues. That's not right either. A portion of the dues are property taxes for sure and are deductible. the guide said we get a 1098 each year for interest and taxes. this is a 2nd home with a mortgage and closing costs, so it would make no sense that none of it is deductible. the question is how much of the dues are in play?
thanks everyone.

The ONLY portion you can deduct is the part that's real property tax and that is a small %. The only other feasible deduction is the interest paid for some but not all members. It is black and white with some very convoluted and minor maybe type exceptions that are very cloudy and very risky to do otherwise. If one rents, there are a few other things you can deduct such as listing fees, phone calls, damages, etc. If one truly does it as a business and never uses it, there are a few other things as I noted above.

 

[silmarg]

Property Tax are deductible (assuming you itemize) for all properties you own - even interest in DVC. As mentioned by a previous poster, the property taxes are a small part of the maintenance fee.

Mortgage Interest is not always deductible. You can only deduct mortgage interest on your primary residence and one other piece of real estate (and DVC can count as this real estate).

The only other way to deduct other parts of the MF is by treating it a a rental/business. But even in that case, the cost of a trip to Fla would not be deductible - as mentioned previously

Another tax matter that is in the MF are costs for capital improvements. Technically that increases your basis in your DVC interest. So if you sold your DVC at a gain the amounts paid for such capital improvements would decrease the amount of the gain. But this matters only to those who bought DVC many years ago (since they are the only ones who may have a gain if they sold)...

I am a tax practitioner - you'd be surprised what people (even professionals) put on their tax returns. Only if the IRS audits you will you have to deal with the issue, but the benefit is miniscule with trying something like deducting all the MFs vs the embarrassment and cost/hassle of getting caught.

 

[Dean]

Property Tax are deductible (assuming you itemize) for all properties you own - even interest in DVC. As mentioned by a previous poster, the property taxes are a small part of the maintenance fee.

Mortgage Interest is not always deductible. You can only deduct mortgage interest on your primary residence and one other piece of real estate (and DVC can count as this real estate).

The only other way to deduct other parts of the MF is by treating it a a rental/business. But even in that case, the cost of a trip to Fla would not be deductible - as mentioned previously

Another tax matter that is in the MF are costs for capital improvements. Technically that increases your basis in your DVC interest. So if you sold your DVC at a gain the amounts paid for such capital improvements would decrease the amount of the gain. But this matters only to those who bought DVC many years ago (since they are the only ones who may have a gain if they sold)...

I am a tax practitioner - you'd be surprised what people (even professionals) put on their tax returns. Only if the IRS audits you will you have to deal with the issue, but the benefit is miniscule with trying something like deducting all the MFs vs the embarrassment and cost/hassle of getting caught.

One thing to add. The interest has to be a formal mortgage. Not an issue with DVC directly but might be if one financed some other way. We are actually buying a Condo in HH so we've been looking at all these issues. Trips would be deductible only if primarily for the purpose of checking on an investment (even though I know several that overstep this area). I don't think there's any way to make that claim with DVC even for a formal business other than maybe if you traveled specifically to buy in or buy more.

 

[NewDCLGuy]

The tax portion of the fees is roughly $1/point at most resorts. While not huge, it's also not completely insignificant. Disney doesn't send any tax reporting to most members - I'm not sure if they include property tax info on their loan reporting - so you have to take a few minutes to look up what you paid.

 

[Mgeris]

I am a CPA and Dean and Silmarg have it all correct. The one thing I would add is there is currently the ability to take some property tax deduction even if you use the Standard deduction. It is a fixed amount so if you are using the standard deduction and own a house the DVC property tax will probably not give you any benefit.

On a technical matter, since most all individual taxpayers are "cash basis" you should use you annual dues statement to determine the the amount of actual cash paid during that tax year for DVC property tax. So tax the estimated amount for the year plus or minus the adjustment for the prior year's amount.

 

[jerseygal]

Unless you have a Schedule E, Rental Property, only the portion of the dues which are deemed property taxes are deductible...such a very small amount of the annual dues.

For DVC, the answer is whoever is deducting the entire portion of the annual dues is incorrect and violating the tax law!

Renting for a profit motive as a business, Schedule E is prohibited by DVC, so in this case, having a Schedule E as a rental for DVC timeshare business, to the best of my understanding is strictly prohibited in the bylaws of DVC.

Ask you tax advisor! I'm sure he or she will agree on the fact that only interest and the real estate tax portion of the dues are deductible on Schedule A!!!:Wish it was otherwise, but its not!

 

[DisneySJB]

You will get a form 1098 every year. Since we financed, the interest is included in this statement along with the property tax. Once DVC is paid off (soon!), this will not be a significant deduction for us at all.

If you are thinking the deduction will make a big difference on your taxes, I wouldn't count on it. It is a small amount - especially if it is paid off. That being said...I will always use it b/c every little bit counts.

 

[Anthony1971]

You will get a form 1098 every year. Since we financed, the interest is included in this statement along with the property tax. Once DVC is paid off (soon!), this will not be a significant deduction for us at all.

If you are thinking the deduction will make a big difference on your taxes, I wouldn't count on it. It is a small amount - especially if it is paid off. That being said...I will always use it b/c every little bit counts.

You will only get a 1098 so long as you pay interest.
Ater your loan is paid you will need to figure your taxes form your dues statement where they are clearly stated.