How to Deduct or Claim Timeshare Expenses on Your Annual Taxes
It’s beginning to look a lot like… taxes?! The sad truth is, tax season is here. If you’re like many timeshare owners, you’re probably wondering how to handle your timeshare come tax-time.
Whether you used, sold, donated or rented your timeshare this year; you’ll have to determine how best to account for your vacation ownership property on your tax forms. Below you’ll find a brief overview of how to claim or deduct your timeshare, based on your usage:
If You Own a Timeshare
Property Tax Deductions: If you own a timeshare that you did not rent out during the previous year, you may be eligible for property tax deductions found in Schedule A, section 164, of your IRS tax return.
If the property taxes applicable to your unit are billed separately to you (such as in California), or if your resort shows them as a separate item on your maintenance fee billing, those property taxes should be deductible. However, if you have to seek out the tax amount applicable to your unit by examining the financial statements, the taxes are likely not deductible.
Interest on Timeshare Loans: 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. If your timeshare loan is written as a consumer loan rather than a mortgage loan, it is not tax deductible.
If your property does qualify, you can find the mortgage deduction form in Schedule A, section 163, of your tax returns
If You Rented Your Timeshare
Rental Deductions: If you rent your timeshare, you can deduct most current expenses related to your timeshare against the rental income. File a timeshare for vacation home deductions in Section 280A of your IRS tax returns. In this section, you can deduct costs such as maintenance fees, advertising expenses and rental broker commissions.
Rental Income and/or Losses: You should list your rental income and related deductions on Schedule E. Losses from renting your timeshares will normally not be allowable as a tax deduction. Tax laws for timeshare rentals are complicated. For a more comprehensive explanation, click here.
If You Sold Your Timeshare
Any profit on the sale of your timeshare is taxable. Profit on sale is treated as capital gain, subject to favorable tax rates if owned for more than one year.
For gain purposes, your cost is generally your original cost, plus additions for the following items:
Closing costs incurred when you purchased your timeshare.
The portion of your annual maintenance fee (for all years owned) allocated to capital reserves or used specifically for capital improvements (such as a new roof).
Any special assessments for capital improvement purposes which you paid. This amount should be reduced by any depreciation expenses incurred in any years you rented the timeshare.
If you sell at a loss, the loss is normally not deductible.
If You Donated Your Timeshare
If you worked with a company like Donate For a Cause, you may file a timeshare you donated to charity on Form 8283 of your returns. Be sure to obtain a copy of your receipt from your sale of the timeshare to a charity, and enclose the receipt in your tax returns. If your timeshare exceeded $5,000 in value, you must provide a written appraisal of the timeshare by an independent appraiser, in section B of Form 8283.
NOTE: donating the use of your week to charity (a rental donation versus donating your ownership of the timeshare unit) does not entitle you to a charitable tax deduction.
Don’t let your timeshare expenses sneak up on you come tax time. Hopefully you’ve kept careful records of any payments or transactions, and have itemized access to your bill. If you don’t have these records, you may be able to contact your timeshare developer directly for help.
The information above is intended to help you gain a better understanding of timeshares and tax laws. It is not intended to replace the consultation or advice of a tax professional. If you have any questions about how to claim or deduct expenses for your timeshare, please contact your CPA!