Timeshares and Taxes

Taxes are complicated enough on their own; owning a timeshare makes them even more so. Your timeshare could either increase or decrease your total tax bill. Every situation will be different, so if you are in any doubt have a tax professional complete your return to ensure that it contains no errors.

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As a timeshare owner, you likely are subject to certain unique taxes and tax regulation that do not apply to most people. Therefore, it is vital that you take the time to understand in advance exactly how taxes factor into your timeshare ownership. Depending on your specific situation, your taxes could be impacted in several different ways by your timeshare.

Income Taxes and Timeshares

First, you must have owned your timeshare property for at least a year for it to be eligible for any of the applicable tax deductions. After that time, interest on a loan for a timeshare may be deductible since tax law currently allows taxpayers to deduct the interest they pay on a primary home, as well as on one other home — such as a timeshare vacation property. Of course, you can only deduct the interest you pay for one timeshare, so if you own multiple timeshare in different locations, you will have to choose which one to deduct on your taxes

In order to be allowed to deduct the interest, your timeshare loan must be a secure loan that is connected to the property being financed. Using a credit card with a high limit for your timeshare, therefore, means that by law you cannot deduct the interest. In addition, in some cases you may not be able to deduct the interest if your loan was provided directly by the timeshare company.

Property Taxes and Timeshares

Owning a timeshare will likely increase your total property tax bill. However, if you are required to pay property taxes on your timeshare, then you likely will also be able to deduct the property taxes from your income taxes. To be eligible, the property taxes must be billed directly and cannot be listed separately on a maintenance bill. Unlike with interest payments, you can deduct property taxes from several timeshares, so you can take advantage of this tax benefit on however many you own.

You also have to meet the IRS rules of the timeshare being a vacation home by spending at least 15 days per year in it. Additionally, you must own at least three weeks in one timeshare property, rather than spreading the time out over several different properties.

Tax Deductions for Charity

It is also allowable to donate a timeshare and count its fair market value as a deduction on your income taxes. If the timeshare’s value is higher than $5,000, you will have to get it appraised before donating it to ensure that you can prove its value to the IRS if necessary. If you own a timeshare and need a big tax deduction, donating it to the charity of your choice can be the perfect solution.

Rental Losses and Timeshare Taxes

If you use your timeshare as a rental property, you may be allowed to write off losses of as much as $25,000 as a tax deduction. However, you must comply with a list of different regulations to be able to deduct your rental losses. For example, your gross income levels must be sufficiently low and the rental periods must last for longer than one week.

The bottom line is that owning a timeshare means that you must be knowledgeable about all relevant tax laws. Due to the complexity of these issues, relying on a professional for help can be a wise decision.