US taxes when renting out points

[JackosinDIS]

Hi,

Has anyone dealt with submitting US tax returns when renting out points? I can see that taxes should be paid on income from properties in the US, but it seems like a long and convoluted process to get a tax number, and figure out how to actually submit the returns to the IRS.

Does anyone have a recommendation for a UK based company that can handle this side of things that doesn’t cost the earth and wipe out any $$ you actually make on renting?!

 

[Caribcat]

There is something called the US-UK tax treaty. In essence this means that you only pay tax in one country. If you file a UK tax return then you can declare and pay taxes in the UK.

You need an EIN number if a company or ITIN if personal in the US so the IRS can keep track. I also think you have to file form 8833 to the IRS (I stand to be corrected on the form/ form number.).

 

[ChipTheRescueRanger]

You might find renting on one of the UK boards might work better as would be paid in £ and I guess you declare as income to HMRC if you even need to.

 

[Mkaiser1]

You might find renting on one of the UK boards might work better as would be paid in £ and I guess you declare as income to HMRC if you even need to.

I didn’t realise there were UK boards you could rent points out through?!

 

[ChipTheRescueRanger]

I didn’t realise there were UK boards you could rent points out through?!

Thedibb for example is a uk based forum. sadly there are no UK DVC rental companies. but probably be a bit niche

 

[Mkaiser1]

Thedibb for example is a uk based forum. sadly there are no UK DVC rental companies. but probably be a bit niche

I‘ll take a look a TheDibb. Do people just offer their points to other forum members on there then?

 

[ChipTheRescueRanger]

I‘ll take a look a TheDibb. Do people just offer their points to other forum members on there then?

Yes similar to on here. But all UK based

 

[Noodlez]

If you want to rent points through a broker the best one to use is David's (https://dvcrequest.com/). They're based in Canada and don't pay any tax on your behalf.

I don't think it matters whether you rent on here, on a UK board, or on social media. It's still up to you to declare any relevant amount to HMRC. The main advantage of renting on UK boards is payment in pounds rather than having to convert dollars.

 

[JackosinDIS]

So I looked in to this a bit further with a specialist US tax advisor. The position is that I need to submit a U.S. income tax return and pay tax in the US for any rental income I receive for points rented as the property is based in the US.

To do so I need to get an ITIN number and submit a yearly tax return to the IRS.

I also need to declare the income to HMRC on my UK tax return, but you don’t have to pay tax twice because of the tax treaty between the 2 countries (so you effectively knock off any tax you have already paid to the IRS).

It seems to be a complete pain to do things ‘by the book’! But it doesn’t sound like many people actually do this anyway given that it was so hard to find the information in the first place! I’m too scared of getting caught and stopped at the border for not paying my taxes though so I’ll go through the process and report back…

At least one benefit is I’ll have my ITIN number ready for when I come to sell!

 

[Rockenroller]

@JackosinDIS Hi, just wondering if you found out any more info on this and what forms you have to fill in?

 

[JackosinDIS]

@JackosinDIS Hi, just wondering if you found out any more info on this and what forms you have to fill in?

So far, I know that I need to fill in form 1040NR to submit my non-resident tax return, and also form W7 at the same time (which is the application for an ITIN). This will involve seeing a ‘certifying acceptance agent’ - cost around £200 per person.

I think I will also need to complete form W-8 ECI to treat the income as “effectively connected income” to pay tax at the marginal rates rather than at the fixed rate of 30% - not sure on that bit yet.

I am going to engage the services of a US tax return specialist for the first year and will let you know what forms are completed and sent to the IRS.

Hopefully it will then be straight-forward for future tax years!

 

[Rockenroller]

So far, I know that I need to fill in form 1040NR to submit my non-resident tax return, and also form W7 at the same time (which is the application for an ITIN). This will involve seeing a ‘certifying acceptance agent’ - cost around £200 per person.

I think I will also need to complete form W-8 ECI to treat the income as “effectively connected income” to pay tax at the marginal rates rather than at the fixed rate of 30% - not sure on that bit yet.

I am going to engage the services of a US tax return specialist for the first year and will let you know what forms are completed and sent to the IRS.

Hopefully it will then be straight-forward for future tax years!

Thanks for the update. If you can post back once you find out that would be appreciated. Thanks.

 

[McCrae]

So I looked in to this a bit further with a specialist US tax advisor. The position is that I need to submit a U.S. income tax return and pay tax in the US for any rental income I receive for points rented as the property is based in the US.

To do so I need to get an ITIN number and submit a yearly tax return to the IRS.

I also need to declare the income to HMRC on my UK tax return, but you don’t have to pay tax twice because of the tax treaty between the 2 countries (so you effectively knock off any tax you have already paid to the IRS).

It seems to be a complete pain to do things ‘by the book’! But it doesn’t sound like many people actually do this anyway given that it was so hard to find the information in the first place! I’m too scared of getting caught and stopped at the border for not paying my taxes though so I’ll go through the process and report back…

At least one benefit is I’ll have my ITIN number ready for when I come to sell!

Avoid submitting any US tax form unless you have to. They are a nightmare to deal with. If your US income is below $13,000 you don’t need to file a US tax return. Submitting a U.K. tax declaration is good enough. Remember to adjust your income for expenses such as dues and depreciation of the value of points. Depending on how you rent the income you receive from renting maybe over two different tax years. If your contract has more than one owner you only need to declare your share. Finally you are allowed a small amount of foreign income without having to declare it. It used to be around £1000.00.

 

[JackosinDIS]

Thanks for the update. If you can post back once you find out that would be appreciated. Thanks.

So if you’re still interested, the tax return has been submitted. It was form W7 and 1040NR for each owner.

Tax was payable to the IRS at a rate of 10% (after deducting expenses).

I will be able set that tax off against any tax that is owed in the UK.