Timeshare Donations
 


Donate Timeshare to Charity


Timeshare Ownership / Donation Tax Benefits

Timeshare Donation Tax Advantages

Deductible Items (e.g., Taxes and Interest)
Unless you rent your timeshare to others, you might have no deductible amounts related to the timeshare. However, if the property taxes applicable to your unit are billed separately to you (such as in California), those are deductible. They should also be deductible if your resort shows them as a separate item on your maintenance fee billing. However, if you have to seek out the tax amount applicable to your unit by examining the financial statements, the taxes are not deductible.

A few owners can deduct the interest expense on a timeshare loan. The interest is deductible only if the loan is secured by the timeshare as a mortgage and you deduct no other mortgage interest except on your primary home.

*Note that most timeshare loans don't qualify because they are written as consumer loans rather than as mortgages.
Similarly, interest expense on credit card debt used to finance the purchase would not be deductible.
If your timeshare was financed with a home equity loan on your personal residence or by refinancing your mortgage on that residence, the interest is generally deductible, subject to certain limitations.

Can you deduct interest on loans for more than one timeshare?
If you have a mortgage on your primary residence, interest paid on loans on multiple timeshare properties would not be deductible, since interest in connection with only one property other than the primary residence can be deducted. But suppose the multiple timeshares are all at one resort. You might reasonably view these multiple timeshares as one "residence". The tax rules aren’t clear on this issue. Forget about trying to use your timeshare in your business to get depreciation and other deductions.

There is a rule in the tax law that prohibits any business deduction pertaining to an "entertainment facility". Timeshares fit into that category. There are a few very narrow exceptions to this rule. Your annual maintenance fee is not deductible. This annual fee for utilities, pool care, lawn care, other maintenance, management, and other expenses can be compared to similar expenditures that you might incur on your primary residence, which are also not deductible.

Donate a Timeshare To Charity
Should I donate my timeshare to charity? The answer is "Yes!”
If donating a deeded timeshare, the deductible contribution amount will normally be equal to the Fair Market Value (FMV) on the date of donation. That’s the price that an arms-length buyer and seller in the timeshare resale market would agree upon, not what the developer is charging for that same week. If the FMV exceeds $5,000, you’ll need a written appraisal that meets IRS guidelines. If the sale of the property would have resulted in a short-term gain, the FMV must be reduced by this amount.

Right to Use (RTU) timeshares and non-deeded points timeshares are tangible personal property to which additional rules apply. If the charity’s use of the property is unrelated to its primary function (for example, if sold at an auction), the FMV must be reduced by the amount of any gain that would have resulted had the property been sold by the taxpayer.

Why can’t the tax benefit justify a donation?
The truth is that it doesn’t have to! For many of you attempting to liquidate your timeshare you may have found it is no easy task… Avoid these hassles…

Is it worth it?
If you are in this position then the answer is most assuredly YES! Especially when the charitable organization can make meaningful use of your property the gains can increase for you. It is of course best to consult you tax advisor.

Another frequent question is, "Can I get a tax deduction if I donate the use of my week to a charity?" The answer is “No”. IRS regulations won’t allow a charitable deduction for the gift of a right to use property. Donate the use of a week because you are charitable, but you can't deduct any value associated with the use of the week.

Rental Income and Losses
If you rent your timeshare, you can deduct all current expenses, including depreciation, advertising, rental commission and maintenance fees against the rental income. Special assessments for remodeling, roof and furniture replacement and similar expenditures would not be deductible. Special assessments for repairs and unexpected current expenses might be deductible, depending on the nature of the expenses. Travel expenses to check on your timeshare will normally not be deductible because, as discussed below, your timeshare rental won’t qualify as a “business”, as is required for such a deduction.

How do you calculate depreciation expense? If your timeshare is newly purchased, even from a secondary market, you can base your claimed depreciation expense on your purchase cost. However, if you have previously used your timeshare for personal purposes (including an exchange or use by friends or family), you must base your depreciation on current value - which means resale value - as of the date you convert to rental use.
If deducting expenses from rental income results in net rental income for the year, it's taxable. If you have a net rental loss, you cannot deduct the loss.

How come?
First, it's certainly legitimate to deduct rental expenses to offset rental income. However, with timeshare rentals, there are some significant limitations if you incur a loss.
Assuming that like most timeshare owners, you typically rent to tenants for one week or less at a time, your rentals don't qualify as a "rental" business. A special section of the Income Tax Regulations prohibits treating your loss as a “rental loss” if the average rental period for a particular tenant is seven days or less.

So what happens to the loss if it's not treated as a business rental loss? It falls into the passive activity loss rules of 469 of the Internal Revenue Code. Those rules prohibit deducting such losses except against other passive activity income. Such income is narrowly defined and doesn't include, for example, dividends, interest or other investment income. You're pretty much stuck with carrying over such losses to use against positive taxable income from your rental activities in future years. You can also deduct any carryover losses related to a rental property in the year you sell that timeshare. There are a number of complex rules that could change the result here - including the vacation home rules, rules relating to renting to tenants for longer than one week at a time, etc.

Vacation Home Rules
Wouldn't the vacation home tax rules apply to a rental gain, allowing you to avoid reporting the income, because you rented the property for fewer than 15 days? No, the vacation home tax rules will usually not apply. Thus, you must report the rental profit - whether you own one week or a number of weeks.

The vacation home rules apply only if you use the "vacation home" for at least 15 days each year for personal purposes. A timeshare can qualify as a vacation home. However, unless you own at least four weeks at a single resort, using at least three of the weeks for personal purposes, you can't take the benefit of excluding the income from renting the fourth week, because there is no practical way that you could use your timeshare for at least 15 days and rent it out to others.
Thus, in almost every situation, you must report the rental profit. You can also offset losses from some rentals against profits on others to minimize your net taxable income, but deducting a net loss is still subject to the rules above.

Donation Tax Benefits 1  Donate a Timeshare

 

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