Taxes on Rentals?

[eva]

There were a couple threads awhile back that discussed having to pay taxes on money that was collected from renting points. I did a search and there seems to be no conclusion to whether you have to pay taxes on that money or not. My sister is talking about renting some points since her husband is getting activated and will be going to Cuba next month. Any tax lawyers or tax preparers out there know the answer? There seems to be a 50-50 split on the board as to whether you have to pay taxes on that money.

 

[PamOKW]

I can't find it now but I know that I referenced an IRS section that discusses the matter. I'm pretty sure that taxes are indeed owed...it is income. Not paying the taxes would be similar to those who don't accurately report household employees like a nanny. Of course, a tax accountant could provide the best perspective.

 

[CarolA]

I am not a tax expert. However, from my mother who used to do a lot of taxes I kind of came up with my personal rule of thumb. Casual income which occurs only one time or rarely (ie your yard sale) I would not bother to report. Now if my yard sale extended into a weekly booth at the flea market then you would probably need to report it.

 

[Disney1fan2002]

Here is a question I have. In the real world, a tenant pays rent, and the landlord has to report the rental income. But, as a renter, I can claim money I pay for rent on my taxes and get a tax break. Similar to mortgage interest people pay, just not as much.

So, if a person who rents out their DVC points once in awhile is expected to report that as rental income, then the person who is renting the points should be able to claim it as "rent" on their taxes. NO?

 

[CarolA]

Well what I am really curious about is that you can claim the rent as an expense on your taxes? Your FEDERAL taxes?

 

[jel0511]

O.K. as a CPA, I'm going to try to answer some of the questions here. First off, if you rent points, you DEFINATELY have to report it as rental income. You are using an asset to gain income, therefore it is reportable. Second off, if you rent DVC points, you are not renting a primary home, you are getting a place for a vacation, so that is not deductable. Third, I assume Disney1fan2002 is referring to state taxes, since rent isn't deductible on Federal Taxes. Here in NJ, renters can deduct 18% of their rent. A note to CaroA, you don't need to report income gained from a yardsale, UNLESS you sell something for more than it's worth. You're disposing an asset, which you purchased. If you sell it for less than it worth (usually what happens at a yard sale), you actually have no gain to report. For example, you sell a clock for $5, but you purchased it for $100 and it's about 10 years old. That clock is most likely worth more than $5(tricky, but based on depreciation and likely life span, etc), so there is no gain to report. You just deem it worthless since you no longer want the clock, but in the eyes of tax law, EVERYTHING has a monatery value, regardless whether you think it does or not. Same thing for clothes that are donated to a charity, the IRS usually provides NEGLIGIBLE value to that for deduction purposes. I hope this helps, and if there are anyother questions, ask.

 

[Caskbill]

Some confusion may come from the difference between renting out a time share and renting out a totally owned unit such as a condominium or vacation home. If you own a vacation house, there is something like a 15 day 'grace' amount where you can rent it out without declaring the rent as income. However this does not apply to a timeshare, so any rental of your DVC time would be income for tax purposes.

Here in Indiana deduction of rent for your primary dwelling is allowed on the State income tax return, but only up to a certain amount, and only on a rental property where the owner of the property is paying Indiana property tax on that property. I would suspect other states are similar.

 

[eva]

That's for answering my question. I will let her know that she will likely have to pay taxes. I'm glad that I don't have to worry about the whole thing myself. It doesn't seem like renting is such a good value if you have to pay taxes on it. We pay taxes at around 30%. I guess that means we would actually only be making $7 a point. Thanks again.