Timeshare ownership comes at a great expense. Therefore, many owners are curious whether their timeshare fees are tax-deductible. As these expenses grow, it is natural to be curious about how they impact your taxes. This article will help you understand the tax status of your timeshare expenses.
Continue reading to determine whether your timeshare maintenance fees can get written off or not. Also, we’ll see what other tax deduction opportunities there are for timeshare owners.
The maintenance fees are the most talked-about timeshare expense when tax return season approaches. Due to their nearly 5% yearly increase, many owners wonder if these fees qualify for tax deductions. Unfortunately, timeshare maintenance fees are not typically deductible.
Resorts use your maintenance fees to cover a wide range of expenses. These fees help pay for unit repairs, amenity upgrades, cleaning, landscaping, etc. Consider these fees serving a similar purpose as the money you spend to maintain your own home. To find out more about what your timeshare maintenance fees go toward, click here.
Since a timeshare unit is considered a private entity, expenses such as maintenance fees and special assessments are typically ineligible for a tax write-off. Nevertheless, consult with your tax professional to ensure this before moving on.
One rare exception for tax write-offs on timeshare maintenance fees is rental income. Those using their timeshare as an additional source of income by renting it out to others must report their rental income when filing taxes. By doing so, you may qualify for tax deductions. Typically, owners are permitted to standard business expense deductions if they paid their maintenance fees but rented their unit out to others.
Again, make sure you have checked with your tax professional whether your maintenance fees are tax-deductible.
As a timeshare owner, you probably wonder if any other expenses are valid tax deductions. You'll be happy to know you may qualify to claim several types of deductions. Some are common amongst real estate properties, while others are specific only to timeshares. Let's have a look at a few of the best examples here:
Many owners take out a loan to cover the purchase price. Depending on the type of loan, you may or may not be able to deduct your loan interest from the timeshare payments.
If you purchased with a credit card or a lease directly from the timeshare company, sadly, you probably will not be able to write off the interest. However, if it's a secured loan, the interest you pay is likely tax-deductible. So, what is a secured loan, you ask? A loan with collateral, which in this case, can either be your deeded timeshare week or a home equity loan. While taking on debt is not ideal, a secured loan may at least relieve some financial hardship.
A tax professional can help to advise you as to whether your timeshare loan interest payments are tax-deductible.
The relationship between timeshares and property taxes varies state by state. However, one factor remains the same: deeded ownership. Your local government will likely bill your share of the property taxes directly or include it in your other bills with deeded timeshare ownership.
Deeded owners who've billed their property taxes separately should have an easy deduction process. It becomes more challenging when these taxes get lumped together with other bills such as maintenance fees. You may even have to request an itemized statement from your timeshare company to distinguish how much you pay in maintenance fees versus property taxes.
Consider consulting with your tax advisor to determine how you can deduct your timeshare property taxes.
As mentioned earlier, timeshare owners who purchased with the sole intention of renting it may qualify for deductions. Remember always to report your rental expense income when filing, and be aware that you can only deduct expenses up to that amount. The IRS has several regulations and limitations regarding your rental-use tax deduction worth looking into before investing in a timeshare.
It is worth noting that these types of deductions are not exclusive to timeshares but are considered the same as any business expense write-offs. So, no, you are not getting any favorable treatment from the IRS if you own a timeshare. Remember to consult with your tax advisor before filing taxes to determine if you qualify for deductions.
Many owners are so eager to get rid of their unwanted timeshare that they bypass selling it and choose to donate it instead. By donating your timeshare, you may become eligible for a tax rebate equal to the fair market value of the vacation property. Be aware that this does usually require an independent appraisal with documentation backing up your deduction claims. Check with a tax professional for more information on this process.
If you want to get rid of your property without the extra hassle of donating it, then consider working with a timeshare exit team. Find a trustworthy timeshare exit company with experienced timeshare experts, such as Wesley Financial Group, LLC.*
“Points-based" timeshares are much harder to claim deductions for because they don't technically equate to real estate ownership. This type of timeshare typically includes a "right-to-use" agreement rather than a "deeded" agreement. With this type, consumers do not own a deeded piece of property but only a time selection. Therefore, it is much harder to claim a deduction for timeshare mortgage interest. Although the "points-based" grows more and more popular each year, many buyers are unaware they're losing some ownership rights.
Your timeshare property has many regulations that you must follow when filing taxes. To properly prepare your tax report and ensure that you receive the proper deductions, you will want to work with a tax professional. More specifically, you want to find an expert in taxes and timeshares.
Finding help year-round from timeshare developers is challenging enough, so you can imagine it is even more agonizing during tax season. Finding support from a professional can help steer you in the right direction when your resort does not make any effort to help.
Writing off your annual maintenance fee is highly unlikely. However, other tax deduction options for your vacation ownership are worth exploring. This article only covered the surface of all the deduction opportunities. So remember to consult with a tax professional to help you determine the best course of action when you decide to file your taxes.
Wesley Financial Group, LLC, and its affiliates, successors, or assigns are not lawyers or a law firm and do not engage in the practice of law or provide legal advice or legal representation. All information, software, services, and comments provided on this site are for informational and self-help purposes and not intended to substitute for professional advice, legal or otherwise.