*Statements and opinions included in this article should not be construed as professional advice. Please consult your accountant and/or tax attorney.
Having too many Disney Vacation Club points is not a predicament we frequently talk about, but one too many owners have now found themselves in thanks to this year. As a result, discussions regarding renting DVC points have been trending over on the DVC Fan Facebook Group and DISboards, with one common question: Do I have to pay taxes on my rental income?
You may be thinking this should be a simple yes or no, but there are many things related to Disney Vacation Club rental income you should keep in mind when planning for the upcoming tax season:
Income is Income According to Uncle Sam
When it comes to the United States, federal and state tax laws consider the amount of money received by an owner in a DVC Rental transaction taxable income. This means that the amount of funds received will need to be reported at the end of the year for tax purposes.
One of the most frequent conversations we hear is whether international ownership or utilizing an intermediary company located outside the United States reduces this tax burden?
According to Uncle Sam, income is income no matter who you are using and what they do or don’t report on your behalf. Since Disney Vacation Club properties are located within the United States, all owners must pay taxes on income received. This includes both international owners and those using rental agencies located outside the United States not bound to IRS reporting requirements.
The bottom line is if you are renting your DVC points, taxes are a part of the process no matter who you use or where you are located.
The 1099-MISC Form
An IRS 1099-MISC form is a record that some entity other than your employer paid you money. The individual receiving the funds and the IRS get copies of this to track the magic word: Income!
In the case of Disney Vacation Club rental income, this is typically reported on a 1099 form by a reputable rental company such as DVC Rental Store in time for tax season.
Receiving a 1099-MISC is not always guaranteed and is determined by how you choose to receive your DVC rental income. According to QuickBooks, “Payments to 1099 vendors made via credit card, debit card, or third party system, such as PayPal, are excluded from the 1099-MISC and 1099-NEC calculations. This is because the financial institution reports these payments, so you don’t have to.”
PayPal is required to provide customers with a 1099-K form for payments if their total goods and services payments exceed $600 during the tax year.
Several states have lower gross payment volume and transaction limits, so it is essential to check your state and local tax laws and how they impact your reporting.
Our sponsors over at DVC Rental Store have always believed that following the IRS guidelines is in the best interest of each renting member. DVC Members that rent their points in 2023 with DVC Rental Store will receive a 1099 for payments over $600 in rental income via ACH or check. For payments issued via PayPal, these tax forms will be provided by those entities and not DVC Rental Store.
It is important to remember that regardless of whether you receive a 1099 or not, it is your responsibility to report any income received to the IRS correctly. If you have the option, receiving a 1099 is probably preferable since you won’t have to worry about remembering to report your income.
Expenses and Deductions
DVC Rental income may also be subject to certain deductions that can significantly decrease your overall tax burden.
The most significant allowable deduction is the operating expenses and taxes (annual dues) of the rented points. It is important to confirm that these costs are not already being deducted in some manner on your tax return and that a proper calculation is made considering all the variables of our annual dues.
Other reasonable costs that can be deducted include any rental listing fees, banking fees, and commissions.
The Value of Renting
With all these considerations, renting your Disney Vacation Club continues to be very financially lucrative, giving members the best cash value for their points compared to other swap options offered directly by DVC.
Take, for example, Disney’s Polynesian Villas & Bungalows. This resort continues to be one of the most popular Disney Vacation Club Resorts on the rental market, paying out at a premium rate of $18.00 per point.
As we have learned from DVC Rental Store’s blog “The Economics and Value of Renting Your DVC Points”, this value boils down to the amount of money you receive that is above and beyond a resort’s cost per point per year.
With the Polynesian’s cost per point per year sitting at approximately $11.62 per point, members choosing to rent their Polynesian points receive enough to cover these costs and more. For example, on a 200 point rental at Disney’s Polynesian Villas, an owner renting their points would receive approximately $1,276 above and beyond those costs. I don’t know about you, but that’s quite the value for something you may not be using this year!
We hope this article was able to shed a little clarification on what can be a confusing topic. Had experience taxes when renting your DVC points? Please share your story and thoughts with us in the comments!
Are you looking to rent out your points? DVC Rental Store can make the process simple and stress-free. DVC Members can receive up to $18 per point, making DVC Rental Store one of the best values when choosing to rent your points. Visit their website today to learn more or get started!
*Statements and opinions included in this article should not be construed as professional advice. Please consult your accountant and/or tax attorney.
Updated: 6/26/2023
Yes, rental income is taxable per the Internal Revenue Code, However, you can take a deduction on the annual dues you paid. The deduction allowed would be based on the proportional amount of of annual dues attributable to each point rented.
On my 1099 from DVC Rental Store, it has the income in box 1: Rents. When running this through my tax program, the next step is determining how the property was rented. This ends up with 2 issues:
1. It is asking for number of days rented in 2021. I booked the stay for the renter in 2021 but they are not staying until summer 2022. Just to continue the process, I added the 6 days I rented and it brings me to issue #2.
2. It says that the IRS doesn’t care about rentals less than 15 days and to delete the rental form.
This is very beneficial if I can leave it as is. If it was in box 3; other income, there would be a higher tax burden.
Any thoughts on this? Obviously for the purposes of this discussion all opinions are only opinions and cannot be construed as financial advice. Please consult an accountant or tax professional.