I have rented my timeshare for years, and am just now being asked for my tax information. Did something change? Why is this required now?
Great question - we can understand why this is confusing.
U.S. taxpayers have always been required to report any income to the IRS, which includes any timeshare rental income (profit, or not). That part has not changed. The reason you are just seeing this now is due to a change in tax regulations relating to how that income is reported, starting in 2022.
What changed?
In 2021, IRS guidelines required third-party processors to send a 1099-K to anyone who had at least 200 transactions worth $20,000 or more. Most timeshare owners did not fall into this category, unless they had made a business of renting out their weeks. For 2022, the IRS changed the guidelines to any payments over $600 (which is just about every rental), thanks in part to the pandemic and new government approaches to the gig economy.
What will this look like?
Any platform that processes that processes a payment for you (such as RedWeek for those using our online booking service) will be providing a 1099-K to U.S. owners at the beginning of the following year to help with this tax preparation. All other rental platforms, including Airbnb and VRBO, will work the same - to use payment handling services, the platform will provide the relevant tax forms.
The timing of the form is based on the date you receive the payout. So, if you are renting your 2022 weeks, you will receive the relevant tax forms from us in early 2023. If you are renting out your 2023 weeks, even now, you wouldn’t receive the forms until early 2024.
If you are using RedWeek for DIY timeshare rentals, your 1099-K will not come from us, but PayPal would likely be sending you one, as they also need to comply with this regulation.
Is this all bad news?
If you have not been reporting your timeshare rental income, this may feel like bad news. We know most owners aren’t rolling in profits from their timeshares. Most timeshare owners are just trying to cover their cost of ownership for the year. That’s where it gets interesting. We are not tax advisors, so cannot offer you official advice. But, generally in the U.S., when you report income, you can also deduct expenses related to acquiring that income. For timeshares, that will likely include your costs of advertising it (RedWeek posting and full-service fees, etc.). We have a suspicion you may even be able to justify writing off your maintenance fee for the year, but are currently looking for a CPA to interview to clarify how this might look. If you are renting out your timeshares, please call a tax professional for clarity on your specific situation, and which expenses are eligible for itemized deductions.
What about owners who are not from the U.S.?
If you are not a U.S. taxpayer, you will not get a 1099-K for your activities, but the U.S. company paying you (i.e. RedWeek) may still need to identify payments made to you. We are currently exploring what needs to be reported to non-U.S. taxpayers, in the meantime, we will need non U.S. taxpayers to provide basic tax information as well – you will be able to tell us if you are a citizen of another country, and will only get the forms that apply to you.
What should I do now?
If you have an upcoming rental payout through RedWeek, you’ll need to provide us with some basic taxpayer information. We will handle the rest. This change does not affect 2021 payments, so we will only need the info from you for 2022 and beyond. Start preparing now for future years’ returns by chatting with your tax advisor about the best strategies to report this income and handle your deductions. Record keeping now – keeping track of all expenses related to your timeshare rental – can help ease you into next year’s tax prep.
