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Old 02-09-2018, 09:43 AM   #51
cornbread4
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Originally Posted by MagicJourneys View Post
I rent out points quite frequently and always report the rental income. I offset the rental income by the operating expenses and the depreciation of the rented points. There does not seem to be any official guidance on how to compute depreciation so I calculate it using what I think is a fairly defensible method by multiplying the annual number of points at the time I purchased them by the number of years remaining for that resort to get the grand total of points, and then dividing my total purchase price by that grand total of points to get the depreciation per point for that contract. I then multiply this by the number of points rented to get the depreciation for that rental to subtract from the rental income.

As an example, say you bought 160 Beach Club points at $105 per point in 2015. These points expire in 2042 so you have 27 use years, for a total of 160x27=4320 points. You paid a total of 160 x $105 = $16,800, so your depreciation per point is $16800/4320 = $3.89. If you rented out your 160 points in 2017 for $14.50 per point then the calculations for the taxable income would be as follows:
Rental Income=$14.50x160 = $2320
Depreciation = $3.89x160 = ($622)
Operating Expenses = $4.02x160 = ($643)
Total taxable income = $1055

In this example the number that would appear on your 1099 (if you received one) would of course be the $2320, without any of the deductions.

I am ignoring the real estate tax in these calculations because I deduct the real estate taxes for all my points (rented or not rented) along with my main residence real estate taxes.
Thanks for the reply. I really like your approach- much cleaner than what I was looking at doing (switching the property in & out of service and just depreciating in big rental years).
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Old 02-09-2018, 10:54 AM   #52
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Quote:
Originally Posted by MagicJourneys View Post
I rent out points quite frequently and always report the rental income. I offset the rental income by the operating expenses and the depreciation of the rented points. There does not seem to be any official guidance on how to compute depreciation so I calculate it using what I think is a fairly defensible method by multiplying the annual number of points at the time I purchased them by the number of years remaining for that resort to get the grand total of points, and then dividing my total purchase price by that grand total of points to get the depreciation per point for that contract. I then multiply this by the number of points rented to get the depreciation for that rental to subtract from the rental income.

As an example, say you bought 160 Beach Club points at $105 per point in 2015. These points expire in 2042 so you have 27 use years, for a total of 160x27=4320 points. You paid a total of 160 x $105 = $16,800, so your depreciation per point is $16800/4320 = $3.89. If you rented out your 160 points in 2017 for $14.50 per point then the calculations for the taxable income would be as follows:
Rental Income=$14.50x160 = $2320
Depreciation = $3.89x160 = ($622)
Operating Expenses = $4.02x160 = ($643)
Total taxable income = $1055

In this example the number that would appear on your 1099 (if you received one) would of course be the $2320, without any of the deductions.

I am ignoring the real estate tax in these calculations because I deduct the real estate taxes for all my points (rented or not rented) along with my main residence real estate taxes.
MagicJourneys,
How did you arrive at the $4.02 per point for "Operating Expenses"?
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Old 02-09-2018, 12:13 PM   #53
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MagicJourneys,
How did you arrive at the $4.02 per point for "Operating Expenses"?
It's broken out on the annual dues bill. For 2017 BCV dues were as follows:

Operating Expenses: $4.0189
Reserves: $0.8767
Estimated Property Taxes: $1.3759
Total dues for 2017: $6.2715
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Old 02-09-2018, 02:47 PM   #54
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Originally Posted by MagicJourneys View Post
It's broken out on the annual dues bill. For 2017 BCV dues were as follows:

Operating Expenses: $4.0189
Reserves: $0.8767
Estimated Property Taxes: $1.3759
Total dues for 2017: $6.2715
You can deduct property tax as well, just not the reserves.
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Old 02-09-2018, 03:28 PM   #55
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You can deduct property tax as well, just not the reserves.
Yes you can and I deduct DVC Property Tax every year!
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Old 02-09-2018, 03:33 PM   #56
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Originally Posted by disney65 View Post
You can deduct property tax as well, just not the reserves.
I believe MagicJourneys was excluding the property taxes here because he was deducting them in full on schedule A. But if you're not doing that, you should use both for offsetting your rental income.
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Old 02-09-2018, 06:40 PM   #57
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Originally Posted by disney65 View Post
You can deduct property tax as well, just not the reserves.
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Originally Posted by cornbread4 View Post
I believe MagicJourneys was excluding the property taxes here because he was deducting them in full on schedule A. But if you're not doing that, you should use both for offsetting your rental income.
Correct and correct. I deduct all my property taxes every year for all of my points, rented and unrented, so no need to enter them as an offset to rental income. (One caveat is that for those subject to AMT, you lose the real estate tax deduction but you can still deduct real estate taxes from rental income).
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Old 02-09-2018, 07:35 PM   #58
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Originally Posted by disney65 View Post
You can deduct property tax as well, just not the reserves.
I donít rent, but why not deduct reserves on an annual basis? Do you deduct your share of the amount actually spent from the reserve account, instead of the amount you paid in?
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Old 02-09-2018, 09:15 PM   #59
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I donít rent, but why not deduct reserves on an annual basis? Do you deduct your share of the amount actually spent from the reserve account, instead of the amount you paid in?
I remember reading elsewhere, reserve is not allowed to be deducted for tax purposes. You can google timeshare deduction, may find some newest info.
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Old 02-12-2018, 06:34 PM   #60
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I remember reading elsewhere, reserve is not allowed to be deducted for tax purposes. You can google timeshare deduction, may find some newest info.
Reserves are not deductible expenses in the year you pay them. However, there is a tax benefit to them when you sell the property. The reserve expenses are added to your cost basis when you determine how much gain/loss there is on the sale of the property. It's basically the same as if you were making improvements to any real estate you own. It's simply added to your total "cost" of buying the property which is then subtracted from the amount of your sales proceed to determine your capital gain/loss when you sell.
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