Basic Timeshares Tax Information
Some people are under the misconception that sales of timeshare property are not subject to income tax. The truth is, they are. Timeshare sales are treated the same way as sales of any other kind of real estate. A timeshare property is a capital asset, and if you make a profit when you sell it, you have what's called a capital gain. However, you have to own the timeshare for more than one year before your expenses will be eligible as income tax deductions. You can then deduct the expenses you incur through owning the timeshare. These deductible expenses include the closing costs you paid when you bought the timeshare, annual maintenance fees for the years you owned it, and special assessments, if any were paid.
Like any other real estate property if you sell your timeshare and if you incur loss which is called capital loss, you many not be able to deduct the losses in your tax returns. But situation might differ if you regularly rent the unit; any loss on sale would be termed as allowable business loss and would thus be deductible as an allowable ordinary loss in tax returns. Loss on sale would not be allowed by IRS if the unit had been converted back to personal use before selling. There are no other deductibles allowed against timeshare properties.
The only other income tax deduction allowed against timeshare properties is property tax, but that is only permitted if it is billed separately or if the resort shows it as a separate item on your bill for maintenance fees. You might also be able to deduct the interest on a loan you took out for your timeshare, but only if it is a mortgage and your primary home mortgage is the only other deductible mortgage you have.
Sadly, not all timeshare loans qualify as mortgage loans as they are primarily termed as consumer loans. Also you have to keep in mind that you cannot deduct interest on multiple timeshare loans at a time if you also have a primary home mortgage. But you might be able to deduct interests on multiple timeshares if they are at same resort, as they can be viewed as one timeshare.
You can donate your timeshare property to a charity, but some restrictions apply. If the donated property is a deeded timeshare, the allowable deduction is usually equal to the timeshares fair market value on the date of donation. You will need a written appraisal that meets IRS guidelines if the fair market value is more than $5,000. There are additional rules for non-deeded and right-to-use timeshares that are considered tangible assets. The timeshares fair market value must be reduced by any profit you would have made if you had sold the property instead of donating it.
Timeshare property that is rented has different rules. You will be able to claim deductions for expenses, such as costs of advertising, depreciation, maintenance fees and rental commission. Some special assessments, like unexpected expenses and costs of repair, may be deductible. Other expenses, such as remodeling and travel costs, may not be.
You should also remember that vacation home rules apply if you use your timeshare property for personal use at least 15 days every year. If you use it at least 15 days, the timeshare can also qualify.
Since you are interested in timeshare information and desire to learn more, you must to visit a Timeshare Forum, and check out WeOwnTimeshares. Meet and connect with timeshare owners on this Timeshare Owners Forum and social network. It is free to join and you can set-up your own profile in minutes. Share advice and reviews of different timeshares and begin posting questions in the forum. Visit now.
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