Important Tax Information about Timeshare Properties

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.

Unfortunately, some timeshare loans do not qualify as mortgages because they are primarily consumer loans. You also should know that you will not be able to deduct the interest you pay on multiple timeshare loans you have outstanding at the same time if you also have a mortgage on your primary home. You might be able to deduct interest paid on multiple timeshare loans if they're at the same resort, as it's possible they will collectively be seen 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.

If you rent your timeshare property, you can claim deductions for your related expenses, including rental commissions, maintenance fees, depreciation and costs of advertising. Certain special assessments, for repairs or unexpected expenses, may be tax deductible. Remodeling and travel expenses might not be.

Also one has to remember that vacation home rules apply if you use it for at least fifteen days each year for personal use. The timeshares can also qualify however you should use it at least 15 days.

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