What is deductible on taxes?

[disneygirl1213]

Hi,

We are new DVC members. I usually do my own taxes and itemize. I'm trying to understand what is deductible. We just bought in July of 2010. I did get a 1098 and figured that the mortgage interest is deductible (the sales person inferred that it was). However, one of the other posts says something about it only being deductible if you rent out your points? Is that correct? We do not rent them and don't intend to. Also, there is nothing listed on my 1098 about real estate taxes. Is that because they will not be reported until the end of this year or do I need to look somewhere else?

Thank you for any and all information!

 

[vicki_c]

Real estate taxes are reported on the annual dues invoice.

As for the other, I wouldn't offer an opinion as I am not a tax person. In some cases the mortgage interest is deductible and in some cases it is not. I would consult a tax professional (however, renting out your points or not is not what determines whether it is deductible or not AFAIK).

 

[Rob S.]

Generally, the mortgage interest is deductible unless you already deduct mortgage interest for a second (vacation or rental) home. You can not deduct mortgage interest for three properties.

 

[briand1023]

Mortage interest is deductible(Again based on number of vaca homes you have) and the Real Estate Taxes are deductible, and will be even after you pay your mortgage off.

 

[OhioDVC]

What if you have one DVC membership with multiple contracts at multiple resorts? Since it is one membership do you think the IRS would count that as one second home

Also, it has been 20 years ago I had a second home on the beach. At that time the IRS required you to stay a minimum of 14 days at the second home for it to qualify as a second home. Would that also apply to counting DVC as a second home?

 

[OhioDVC]

I did a little research and found the following from IRS Publication 936

Time-sharing arrangements. You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year.

Rental of time-share. If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. See Second home rented out earlier, for the use requirement. To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it.

Also...

Secured Debt

You can deduct your home mortgage interest only if your mortgage is a secured debt. A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:

* Makes your ownership in a qualified home security for payment of the debt,
* Provides, in case of default, that your home could satisfy the debt, and
* Is recorded or is otherwise perfected under any state or local law that applies.

In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. In this publication, mortgage will refer to secured debt.

And...

Qualified Home

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home.

 

[disneygirl1213]

Should I have received my annual dues invoice in the mail? I know that we have our dues deducted directly each month from our checking acct. Thank you for all of the info!

 

[DVCGeek]

Should I have received my annual dues invoice in the mail?

Yes. The statement is also available online. I also have mine debited monthly form a savings account but I did get a paper statement over a month ago IIRC...

 

[NewDCLGuy]

What if you have one DVC membership with multiple contracts at multiple resorts? Since it is one membership do you think the IRS would count that as one second home

Nobody knows. The issue has been around for a while (not just at DVC, but with people owning multiple weeks at more traditional timeshares.) I've read several tax attorneys opine that it's certainly reasonable to assume they can all be lumped together and counted as one home for purposes of the two home rule. Doesn't mean the IRS will agree if it ever formally comes up.

Note that it gets slightly messier if all the contracts aren't under one membership.

Also, it has been 20 years ago I had a second home on the beach. At that time the IRS required you to stay a minimum of 14 days at the second home for it to qualify as a second home. Would that also apply to counting DVC as a second home?

Not for purposes of deducting the mortgage interest. However, there are some tax rules where staying more than 14 days does make a difference (namely, whether you can rent points for a few days without having to report the income.)

 

[il dvc junky]

dvc ownership is a second residence and is tax deductable if you itemize. I am a CPA

 

[princess81499]

Did everyone receive their tax form for mortgage interest from DVC? I did not yet. Can I access that info from the member site?

 

[YourEveryDayAdam]

Nobody knows. The issue has been around for a while (not just at DVC, but with people owning multiple weeks at more traditional timeshares.) I've read several tax attorneys opine that it's certainly reasonable to assume they can all be lumped together and counted as one home for purposes of the two home rule. Doesn't mean the IRS will agree if it ever formally comes up.

Disclaimer: I am not a tax professional or a lawyer. I just pretend to be one on the internet

Just my two cents:

Unless you have a HUGE dvc contract, the mortgage interest on your secondary DVC contracts iare going to be pretty small, in IRS terms.

I have 3 DVC contracts...My larger primary contract and two smaller add-ons. My interest on the 3 was $2417, $632 and $347 in 2010. I also own my home and have a big chunk of mortgage interest at about $9000 as well.

So, there's no question that my home's mortgage interest and the largest of the 3 DVC contracts are deductible. That is $11,400 in uncontested mortgage interest.

The other two contracts are in a grey area. They are $632 and $347. All told, less than $1000 in grey area deductions. This will amount to, about $250 (depending on your tax situation) in less taxes if you choose to include them in your deductions....Could be as high as $350 or as low as $100...all depending on what tax bracket your in.

So, the amount of grey area tax relief for me is $250. My philosophy on it is to just go ahead and do it. For such a small amount, they likely won't even call you on it, let alone fight you on it. (it'll cost them more to fight it than they would bring in). If somehow you do lose, the worse that could really happen is you'll have to pay the money back with a few bucks in interest. Now, the chances of this happening are EXTREMELY slim. If the only amount in question is the $250, then you've got no problem.

Now, if the amount in question starts to approach the thousands, then you might want to re-consider it...or if you have other grey-area deductions that start to accumulate to the thousands.