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Taxable Gain on Rental of DC Points?

jlepstein1

TUG Member
Joined
Apr 3, 2011
Messages
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Resorts Owned
Ocean Pointe, Beachplace, Barony
I am an enrolled owner and am thinking about renting some DC points that I can't easily use.

Does anyone know if the rental income is taxable? I assume it is. But if it is, then can you deduct the cost of the annual MF for the week that was linked to the points which you rented? That way you might only pay taxes on the net income rather than on the gross revenue.

In general, current tax laws do not impose taxes on rental income of vacation homes of less than 15 days, and we have not been taxed when renting a week here or a week there (provided the total was not more than 15 days). But points are different of course. Still, I suspect that you would not be taxed provided that you could show that those points originated with a specific week.

Does anyone have any thoughts on this issue?
 

FractionalTraveler

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I am not an attorney or an accountant, but I believe the MF on timeshares are not tax deductable unless you have an incorporated business.

As a related example, if you own a business and use a vehicle for business purposes, and that vehicle is not a personal use vehicle, then the yearly MF may be deducted for tax purposes. That is because the vehicle is treated as an expense to the corporation. This only works if the corporation acually pays for the vehicle. If YOU pay for it, it may be treated as income.

Another way to achieve your goal, I have heard folks discuss on these forums is that you place your timeshare portfolio in a trust and make the beneficiary of the trust an LLC.

Then the LLC manages the trust as an asset and can deduct expenses from such management. Exactly what Marriott does with their new points program!

There are obviuosly other tax implications and fees related to such a business model so you should consider it carefully with the guidance of an attorney and accountant.
 

DeniseM

Moderator
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Northern, CA
Resorts Owned
WKORV, WKV, SDO, 4-Kauai Beach Villas, Island Park Village (Yellowstone), Hyatt High Sierra, Dolphin's Cove (Anaheim) NEW: 2 Lawa'i Beach Resort!
Click on the ADVICE link at the top of the page, and read the tax article there.
 

smithde

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May 27, 2008
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I am an enrolled owner and am thinking about renting some DC points that I can't easily use.

Does anyone know if the rental income is taxable? I assume it is. But if it is, then can you deduct the cost of the annual MF for the week that was linked to the points which you rented? That way you might only pay taxes on the net income rather than on the gross revenue.

In general, current tax laws do not impose taxes on rental income of vacation homes of less than 15 days, and we have not been taxed when renting a week here or a week there (provided the total was not more than 15 days). But points are different of course. Still, I suspect that you would not be taxed provided that you could show that those points originated with a specific week.

Does anyone have any thoughts on this issue?

Generally speaking, timeshares do not qualify for vacation home treatment. Based on the information provided, it is likely your prior rentals were taxable events. See http://www.tug2.net/timeshare_advice/TUG_Taxes_and_Timeshares.html

The rental income is taxable, however, maintenance fees related to the points rented can be deducted.
 

Whirl

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For what it is worth. We had a couple weeks we rented through a rental agent for years. We were always given a w-9 for each one (different resorts) to complete before renting and it was taxable income.
 

dioxide45

TUG Review Crew: Expert
TUG Lifetime Member
Joined
May 20, 2006
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48,938
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Location
NE Florida
Resorts Owned
Marriott Grande Vista
Marriott Harbour Lake
Sheraton Vistana Villages
Club Wyndham CWA
I am an enrolled owner and am thinking about renting some DC points that I can't easily use.

Does anyone know if the rental income is taxable? I assume it is. But if it is, then can you deduct the cost of the annual MF for the week that was linked to the points which you rented? That way you might only pay taxes on the net income rather than on the gross revenue.

In general, current tax laws do not impose taxes on rental income of vacation homes of less than 15 days, and we have not been taxed when renting a week here or a week there (provided the total was not more than 15 days). But points are different of course. Still, I suspect that you would not be taxed provided that you could show that those points originated with a specific week.

Does anyone have any thoughts on this issue?

I think you are mixing up two types of taxes here? There is income tax due on any income you make from the rental. The local district where the resort is located that you are renting may also charge a local occupancy tax. In Hawaii this is charged by the resorts directly to those staying there. In St Thomas it was discussed to have owners pay this when they rent out their units to make up for budget shortfalls. This is based on the rental price, but is a local tax and not federal income tax. This is where the less than 15 days usually comes in. If you are renting for only a short period of time, the rental fee is not subject to that tax.

All rental income regardless of the length of the stay is subject to income tax, depending on the local jurisdiction/state/country, there may be other occupancy taxes that you may or may not be required to collect from a renter and remit.
 
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