January 16th, 2018 Dominique Molina (Taxloopholes.com Tax Strategist)
A timeshare is not only a great opportunity to get away for a while, it can be a wonderful investment. Not only does your timeshare qualify for some of the same types of deductions that other property would get you, there are some specific types of deductions you may be able to claim depending on what type of timeshare you have and how you use it.
Let’s take a look at some of the best tax deduction opportunities for your timeshare:
- Maintenance fees. The money you pay to maintain the property may be tax deductible, but only if you rent your timeshare. If you own the timeshare outright, however, you can’t deduct the maintenance fees. This is one of the rare cases where you have access to a deduction when renting that you won’t have access to if you own the property or if you have a secured loan on the property.
- Loan interest payments. Here again, it depends on the exact status of your timeshare. If you’re still making those initial purchase price payments for the timeshare, then the interest can be taxed. However, if you have a secured loan on the timeshare property then you may be able to deduct your interest.
- Property tax deductions. If you’re paying property taxes on your timeshare, and if they are billed separately from your maintenance charges, then you should be able to deduct them as well. If they’re billed the same, you’ll have a harder time deducting those payments. In some cases, it’s simply a matter of asking the management company to send you an itemized bill that shows exactly how much you’re paying in maintenance fees versus how much you’re paying for property taxes.
- Donations. If you donate a timeshare to charity instead of selling it, then you’re going to be entitled to a tax rebate equal to the fair market value of your property. This requires an independent appraisal so you can back up the amount that you’re claiming. There are specific regulations about how much that can be, and a limit to the amount you can claim as a deduction, as well.
- Rental-use deductions. If you own a timeshare that you rent out to someone else, you may be eligible for a rental-use tax deduction on that timeshare.
These are just some of the more common and best tax deductions you can claim on your timeshare; there may be others, depending on the specifics of your timeshare and where it’s located.
In addition, as you prepare your taxes, keep these principles in mind in regard to those timeshare tax deductions:
- The most important factor in how you file your tax deductions in regard to your timeshare is your ownership status. There are some deductions that work only if you own the property, or if you have a secured loan on the property. If you’re purchasing a timeshare on a lease-purchase agreement or still making the down payment, you’re going to miss out on the best deductions.
- When in doubt, talk to a tax professional. The last thing you want to do is face an audit situation where you’ve claimed deductions you weren’t entitled to. Talk to your tax professional about navigating those timeshare tax deductions to make sure you get all of those that are coming to you, and that you don’t inadvertently claim one that isn’t.
- You can only claim deductions on a single timeshare. If you own multiple timeshare properties, you’re going to be limited to claiming the deductions on only one of those properties.
- Don’t forget the income implications of a timeshare. If you rent your timeshare out, you’re going to have to pay taxes on that income. Make sure you know the implications before you rent.
- State and local tax implications may vary. Depending on where your timeshare is located, there may be specific incentives you can take advantage of. Be sure to talk to your tax professional about these, as well.
If you’re smart about it and take advantage of all of the available tax deductions, your timeshare can be a wonderful investment. Make sure you understand the tax laws in your area, and that you keep up with the changes that may take place to the tax code at the federal level each year as well.