Timeshare Rental Income

Forum|Forum|4 years ago
March 17, 2022
2 replies
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I own a timeshare deeded in Florida. The ownership is based on the point system which allows my to use points for vacations at any of the resorts within the system. I used some of the points to rent 4 units, 2 in Newport, RI for 3 nights each and 2 in Atlantic City, NJ for 2 nights each. After general fees and commissions were deducted by the rental agency and resorts, both owned by the timeshare corporation, my net income was only 49%, yet I received a 1099-MISC from the rental agency for the full amount of the rental income. May I deduct the commissions and fees or do I have to pay taxes on the entire amount?

Not A Product Question

MinhT1

The IRS says in this document:

Minimal Rental Use

There's a special rule if you use a dwelling unit as a residence and rent it for fewer than 15 days. In this case, don't report any of the rental income and don't deduct any expenses as rental expenses.

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SO49Author

Is it considered a "residence" if I stayed at a timeshare (in my case at several resorts) for more than 15 days during the year?

ColeenD3

Yes. It is considered a second home.

Rental Property / Personal Use

If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for a number of days that’s more than the greater of:

14 days, or
10% of the total days you rent it to others at a fair rental price.

It's possible that you'll use more than one dwelling unit as a residence during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a residence unless you rent your vacation home to others at a fair rental value for 300 or more days during the year in this example.

A day of personal use of a dwelling unit is any day that the unit is used by:

You or any other person who has an interest in it, unless you rent your interest to another owner as his or her main home and the other owner pays a fair rental price under a shared equity financing agreement
A member of your family or of a family of any other person who has an interest in it, unless the family member uses it as his or her main home and pays a fair rental price
Anyone under an agreement that lets you use some other dwelling unit
Anyone at less than fair rental price

Tax Topic 415

Tmc7

Did you ever get clarification on this? I believe I am in the same situation as you with a company who handled the rental of resort timeshare locations that I had reserved and who submitted a 1099-Misc. I was asked for the property address (which I do not own) for Schedule E.

GeorgeM777

Your timeshare income is taxable, and thus, it gets reported on Schedule E. Your timeshare expenses are deductible and also get entered on Schedule E. How much you can deduct is predicated on whether you rent your timeshare for profit or not-for-profit. The income you received is likely passive income and there are limitations as to how much you can deduct against your passive income. The IRS has provided the following information regarding timeshare properties, among other properties:

In general, if you receive income from the rental of a dwelling unit, such as a house, apartment, or duplex, you can deduct certain expenses.

Besides knowing which expenses may be deductible, it's important to understand potential limitations on the amounts of rental expenses that you can deduct in a tax year.

There are several types of limitations that may apply.

Not-for-profit activities:

If you don't rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income, and you can't carry forward rental expenses in excess of rental income to the next year. However, deductions that are allowed regardless of whether an activity is for-profit (e.g. certain real property taxes and mortgage interest) are not subject to this limitation.
Refer to Publication 527, Residential Rental Property and Publication 535, Business Expenses.

Rental of a dwelling unit (for profit):

The tax treatment of rental income and expenses for a dwelling unit that you also use for personal purposes depends on how many days you used the unit for personal purposes.
Renting to relatives may be considered personal use even if they're paying you rent, unless the family member uses the dwelling unit as his or her main home and pays rent equivalent to the fair rental value.
Refer to Publication 527, Residential Rental Property.

Passive activity losses:

In general, you can deduct passive activity losses to the extent of passive activity income (a limit on loss deductions).
You carry any excess loss forward to the following year or years until used, or you carry any excess loss forward until the year you dispose of your entire interest in the activity in a fully taxable transaction.
There are several exceptions that may apply to the passive activity limitations. Refer to Publication 527, Residential Rental Property and Publication 925, Passive Activity and At-Risk Rules.

IRS: Business Property: Condo, Timeshare etc.

@Tmc7

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