renting DVC points and tax implications for Canadians

Greg36

Mouseketeer
Joined
Mar 30, 2017
We are considering renting out our DVC points next year and I am trying to wrap my head around the tax implications for Canadians (any advice or experiences appreciated). As far as I can tell one option would be to let the broker company take 30% as a withholding tax and this would mean I would not have to file a tax return with the IRS. Does anyone know if David's will take the 30% withholding tax and file a 1042-S? I am assuming that even though David's is in Canada you would still be liable for US taxes as the 'rental property' itself is in the US.

When filing with the CRA I could claim the foreign tax credit to help offset some of that 30% expense plus I would be able to claim costs associated with the MF's. I think I like this route best as I would ideally like to avoid filing in the US.

I understand that one should also pay tax at the state level in Florida (Sales and Use Tax on Rental of Living or Sleeping Accommodations). Does anyone know if you did a point transfer as opposed to a specific reservation if you would still have to pay this tax?

It is nice to at least have an option to recoup MF costs but it really seems like you would be left with very little, if any, 'profit' after paying these three levels of taxes...
 

Madame

DIS Veteran
Joined
Mar 15, 2014
We are considering renting out our DVC points next year and I am trying to wrap my head around the tax implications for Canadians (any advice or experiences appreciated). As far as I can tell one option would be to let the broker company take 30% as a withholding tax and this would mean I would not have to file a tax return with the IRS. Does anyone know if David's will take the 30% withholding tax and file a 1042-S? I am assuming that even though David's is in Canada you would still be liable for US taxes as the 'rental property' itself is in the US.

When filing with the CRA I could claim the foreign tax credit to help offset some of that 30% expense plus I would be able to claim costs associated with the MF's. I think I like this route best as I would ideally like to avoid filing in the US.

I understand that one should also pay tax at the state level in Florida (Sales and Use Tax on Rental of Living or Sleeping Accommodations). Does anyone know if you did a point transfer as opposed to a specific reservation if you would still have to pay this tax?

It is nice to at least have an option to recoup MF costs but it really seems like you would be left with very little, if any, 'profit' after paying these three levels of taxes...
We claimed the rental income on our income tax submission in Canada and offset it somewhat by also claiming MF and the interest on our heloc used to buy the points. We didn’t claim anything stateside. We have neither a SSN nor an ITIN, so I can’t imagine how we would even go about it.
 

CanadaDisney05

Mouseketeer
Joined
Mar 20, 2017
I tried looking into this prior to purchasing, but couldn't really find a definitive answer. I don't plan on renting out points often, but I wanted to know the ins and outs incase I do need to every once in a while. Couple of things I gathered.

1) David's is located in London, ON. I asked them, and they said they do not withhold, or file any sort of W8. It would be on the renter to self report......

2) I searched high and low for the mechanics of how to actually do this, but couldn't find anything reliable. DVC is a bit of an anomaly in the timeshare world because it's a right to use contract for a duration of time. Because of that, I would suggest that it would be perfectly reasonable to deduct maintenance fees, loan interest, and......... amortized value of purchase price, against your net revenue. I don't see how they can deny that purchase price is not a qualified expense. At the end of the day, on my SSR contract I paid 33K CAD for 7000 points (35 * 200). Its a pretty cut and dry calculation, unlike a traditional timeshare where the ownership last forever.

3) Considering anytime I rent it would be only be a few thousand bucks at most, my plan would be to deduct all of these amounts and only report to Canada. Until CRA provides a ruling that the amortized purchase price would not be eligible, I will deduct it.

4) Once all of these expenses are factored in, the taxable income is pretty negligible.
 

mort1331

DIS Veteran
Joined
Jul 15, 2012
So Canada is different than USA. Unless you are renting all the time and making a small business of it, I would check with an accountant and see if its even worth reporting for a few hundred a year. You can not deduct your MF, or intrest owed on the purchase. Just like you can not on your cottage or boat.
If you report in the US you could be opening up a can of worms.
Check with a qualified tax accountant.
 

Madame

DIS Veteran
Joined
Mar 15, 2014
So Canada is different than USA. Unless you are renting all the time and making a small business of it, I would check with an accountant and see if its even worth reporting for a few hundred a year. You can not deduct your MF, or intrest owed on the purchase. Just like you can not on your cottage or boat.
If you report in the US you could be opening up a can of worms.
Check with a qualified tax accountant.
You can claim MF and interest paid in a loan to offset the income. In fact, when we rented out we borrowed points from our next UY and so our 2017 tax return we claimed income for the 2 years of points but only 1 yr of maintenance/interest. 2018 we had no rental income, but still claimed the MF and interest on the 2018 UY points we’d rented in 2017. We use an accounting firm to file our taxes.

No idea about cabins, chalets etc, but this gives me the impression deductions are similar:
 

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