Timeshare Tax Deductions – Complete Guide
Every person who owns a timeshare or is considering the purchase of a timeshare property needs to take tax implications into account.
Taking advantage of tax deductions associated with timeshare ownership can save you thousands of dollars and shrink the overall cost of your timeshare.
Millions of people around the world experience the benefits of timeshare ownership.
They offer people flexibility around vacations and access to beachfront properties, ski resorts, and other high-end vacation destinations they might not otherwise be able to enjoy.
On the other hand, people who are dealing with the financial stress of maintaining ownership may find the adjustments they need from an expert tax team.
Whatever your situation, understanding the deductions available and how it will affect your financial situation is part of owning a timeshare.
With the right team, you can make ownership more affordable in the long-term.
Additionally, if you’re considering selling or donating your timeshare, these transactions likely will have serious implications when you file your taxes.
Here is the complete guide to timeshare tax deductions and how you can make your ownership more tax efficient.
Available Timeshare Tax Deductions
Here is a list of some of the basic timeshare tax deductions available to owners. It’s always a good idea to consult your tax attorney or an accountant to make sure you’re eligible for each deduction you’re claiming.
Timeshare Donations – Many timeshare owners use timeshare donation as a way to offset large tax bills.
Rather than selling your timeshare, which, depending on your situation, could result in a large taxable event (when you make a profit), donating a timeshare helps cut down your overall costs.
Whether you’re donating a timeshare as a charitable donation or you want to do it solely to lower your tax bill, you should consult an expert about which charities accept timeshare donations and the best way to proceed.
Usually, donating a timeshare involves meeting specific regulations regarding money limits, so you’ll likely need to get an independent appraisal before you give it away.
There are also limits governing how much you can give away each year and claim on taxes, so you may only be able to claim part of the value of your timeshare.
Maintenance Fees – Many people who enjoy timeshares discover that they are better off renting a timeshare.
They find that after several years of owners, they want to go to other places or don’t have the free time to use the same unit every year.
As a result, they rent different timeshares that save them money and offer even more flexibility.
However, renting a timeshare usually comes with some sort of cleaning or maintenance fee for your stay.
Any maintenance fees associated with timeshare ownership are tax-deductible.
Rental Use Costs – If you decide to offset the cost of your timeshare by renting it out when you can’t use it, then any costs associated with renting it may be tax-deductible.
This may include any fees you pay to services to maintain the unit or even to advertise it. Again, contact an accountant familiar with timeshare renting for more information.
Interest on Your Loan Payments – This is a great tax deduction that millions of property owners take advantage of every year. This deduction will depend on your ownership and the status of your timeshare.
People who are still paying on the original loan can deduct any interest paid to a loan company.
However, if you’ve already paid off your entire initial loan and then take out a line of credit against your timeshare, you are no longer eligible for this deduction.
Property Tax Payments – Property taxes on timeshares are typically billed separately from any maintenance fees.
If this is the case with your property, then you’re likely eligible to deduct property tax payments from your tax bill.
If they’re billed together, write your management team and ask if they can send you an itemized list that separates your property taxes.
That way you’ll know exactly the amount you can deduct. It prevents you from erroneously claiming maintenance fees like property taxes as well.
Selling Your Timeshare – If you’re thinking about selling your timeshare or if you’ve recently sold your unit, then you may be eligible for some deductions.
Any money you lose on a timeshare can be knocked off your tax bill and lower your personal taxable income.
Selling at a loss is rarely better than making a profit on a sale, but the deduction lessens the blow for certain.
This is especially advantageous for people who are hesitating selling because they don’t want to lose money, but the timeshare is causing them financial hardship.
It may be better to sell at a loss and offload the asset in exchange for longer-term financial stability.
Make Sure You’re Following the Rules
If you’ve filed taxes for several years, then you know by now that accountants will often say, “it depends”.
Unfortunately, many of the tax laws on the books aren’t cut and dry. They involve a lot of nuances.
Every timeshare owner looking for more deductions should be aware that they will likely run into situations in which everything isn’t crystal clear.
PRO TIP
Make sure you work with a reputable CPA and follow all the rules as to not complicate your issues with the IRS. The rules are sometimes not clear and you should know and learn the little differences in each one to stay on the safe side.
Here are some things you should do to protect yourself and make sure you’re getting the right deductions filed every year.
Get Expert Help – At some point, it’s going to be in your best interests to consult tax experts regarding the status of your timeshare.
A tax professional will have filed hundreds of thousands of returns, many of them involving timeshare ownership.
They can guide you in the right direction and help make sure you’re claiming every available deduction. Getting the right tax help is never easy, but it’s easier than ever before.
Don’t just choose the nearest tax preparation company to help with your situation. Do some research ahead of time to make sure you find a company that can help.
Read online reviews to learn about other customers’ experiences. Stay away from any firm that has bad reviews.
You need to realize that these peoples’ experience was so bad that they took the time to write a negative review.
The opposite is also true. People write positive reviews when they are delighted. It’s a great sign that the company will go above and beyond with your taxes.
When you’ve found a few good companies, call them, and ask to set up a tax consultation.
Many of the best companies will offer these for free because they want to understand what you need and make sure they’re capable of handling it or meeting your expectations.
They can talk to you about your ownership status and set some guidelines around what you can expect to happen come tax time.
Learn Your State Laws – Your state and the state where your timeshare is located may have different regulations on deductions you can claim.
Look into any differences to make sure you understand the implications of your timeshare location before you file.
Avoid Simple Tax Mistakes – Don’t do things like stretch the truth or claim more deductions than you’re eligible for. This can either be intentional or accidental. Either way, avoid it at all costs.
For example, some people own multiple timeshares and try to claim deductions for each one.
That’s not allowed and will only do more to draw scrutiny from the IRS. This is yet another reason why getting professional help is a good idea.
Claim Income – Are you renting out your timeshare and claiming rental use costs? Don’t forget that you have to claim any money you make renting it out as income on your tax returns.
You might think you’re making a bit of money renting out your timeshare and suddenly discover that those few thousand dollars you made bumped you up into the next income tax bracket and ended up costing you more money than you expected.
The Importance of Professional Tax Guidance
Know that you know the basic guidelines around timeshare tax deductions, are you ready to file taxes on your own? For some people, that answer is yes.
There are plenty of software solutions on the market that do a fairly good job of guiding you through filing taxes no matter what your situation is.
However, as we’ve stated several times in this guide, timeshare ownership, and any associated deductions is a nuanced area of tax filing.
A lot of people who can easily afford a professional accountant don’t realize how much money they are potentially leaving on the table by going it alone.
The right accountant or tax lawyer can save you a lot of money. What’s more, most of the high-quality firms will offer you a chance to talk to them for free.
They’ll be able to portray over the phone or in-person what they can do for you and whether it’s worth hiring a professional.
Wherever you are in your timeshare ownership journey, it’s probably worth your time to make a few calls and see whether you’re getting all of the tax benefits available.