Exploring Which Timeshare Losses & Fees Are Tax Deductible
If you're like many property owners out there, you've often wondered which timeshare losses and fees are tax deductible and if there's more that your ownership can do for you in terms of lessening your tax burden. And happily, being timeshare owner can sometimes help in this area, by providing a number of potential avenues for tax relief depending on your type of ownership. Your vacation ownership can be a terrific investment, but does your timeshare qualify for any of the same kinds of deductions which other properties might afford you? In order to answer this, you first have to understand that there are a few, particular kinds of deductions you may have the ability to claim, based on which kind of vacation ownership you've got and the way you choose to utilize it.
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Take a moment and walk through some of these possibilities below, in order to determine (based on your individual circumstances) if it is indeed worth it for you to apply for and claim some or all of these potential tax deductions, and if it's worth the effort to take this route. To start off, let’s first look at a few of the best tax opportunities your timeshare might qualify for:
Donations | Donating a timeshare often equates to a tax rebate that is typically tied to the fair market value of the property (in most cases). Claiming this rebate will require a third-party appraisal, so make sure to hire a quality appraiser that has a good reputation. Detailed regulations govern the restrictions on the amount of the rebate as well, and it's not recommended to actively donate timeshare in most cases, simply based on the number of fraudulent timeshare companies in the current market.
Maintenance Fees | As with other types of real estate, maintaining property often comes with some positive tax implications. Here’s the deal – if you want to access this level of tax deductions, you’re going to need to qualify as a renter, meaning you’re renting out your timeshare to someone. Merely owning the unit here won’t suffice, which is somewhat counter-intuitive in the tax world, since many tax deductions are predicated on whether you actually own the property or if you have a loan on the property you’re trying to get a deduction from.
Property Tax | Property taxes might be tax deductible as well, but there’s a catch with these. If your property taxes are lumped together you’re your maintenance fee payments, then you will find it a bit more challenging to deduct them. In either case, asking your resort developer or management company for an itemized bill that breaks out property taxes is a good way to go here.
Loan Interest | The status of your timeshare ownership becomes key in this case, as secured loans that are made for the purpose of purchasing your vacation ownership are sometimes eligible for tax deductions on the interest. There is a distinct difference, however, between initial purchase payments you’ve made on your timeshare (where interest is taxable) and the previous scenario where you might qualify for a deduction.
Rental-Use | Again, going back to your status as a potential timeshare renter, if you rent that timeshare out to someone else, you could be eligible for a rental-use tax deduction on that timeshare. Make sure you know as much about the guidelines and limitations surrounding your particular ownership, before attempting to rent your timeshare, and understand that it is not recommended to go through an unreliable public marketplace such as eBay for timeshare.
This list of common (and potential) deductions and benefits is by no means exhaustive, but it does represent the majority of use cases out there, where owning a timeshare might be able to lessen your tax burden. Similarly, there might be other scenarios and situations where your ownership might impact your tax burden in which the criteria falls into a litany other factors.
In order to make the most of your timeshare tax deductions, consider the following important factors as you develop your ongoing tax strategy:
Note that you cannot claim deductions on multiple timeshare properties. Even if you own more than one timeshare property, you are only allowed to claim timeshare tax deductions on a single timeshare property.
Recognize that your timeshare ownership status will affect your ability to claim tax deductions. If you have a secured loan on your timeshare property, you will be able to take advantage of more timeshare tax deductions than if you’re purchasing it through a lease-purchase plan or still in the process of making a down payment on the property.
Take advantage of local and state tax breaks if available. Certain local and state tax breaks may come into play depending on the specific location of your timeshare. Make sure you do the necessary research and consult with a tax professional to ensure you are not overlooking any local or state tax incentives.
Know the tax aspects of renting your timeshare. Under most circumstances, rental income from timeshares is taxable, so you will need to declare it on your tax return. Therefore, before you decide to rent your timeshare, make sure to research how it will affect your tax situation and how you can offset the income with allowable deductions.
Consult with an experienced tax advisor if you have any questions. Not only should you meet with a tax professional to make sure you take advantage of all timeshare tax deductions available to you, but also to ensure that you don’t unintentionally claim the wrong deductions or commit any other inadvertent tax mistakes.
And whether you’re looking for which timeshare tax deductions best suite your individual use case, or you simply want to understand more about the financial implications of your vacation ownership, Westgate is here to start the conversation and help you avoid the lure of unethical (and fraudulent) timeshare reseller scams, timeshare exit companies, and alleged timeshare owner cancellation services, which often create more financial burden than they help to alleviate.
Always remember that Westgate Resorts is NOT affiliated with any third-party company which means that our top priority is YOU, our owner. Work with us directly towards a beneficial outcome today.
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