subject: Important Tax Information About Timeshare Properties [print this page] Some people have a misconception that timeshare property sales are not subjected to income tax. But in reality timeshares sales are subjected to income tax. It is treated similar to any other kind of real estate property. As a timeshare property is a capital asset so when you sell a timeshare and make profit on it, it is considered as a capital gain. But you have to own the property for more than one year for it to be eligible for income tax. You can include all the costs associated with buying a timeshare like closing costs you had to pay when buying your timeshare, the annual maintenance fee for all the years that you owned the property and special assessments if any.
As with other types of real estate if you sell and lose money, it's considered a capital loss and you might not be permitted to deduct your losses on your income tax return. It's a different situation if you regularly rent out your timeshare. In that case any loss you take on the sale would be an allowable business loss and therefore deductible as an allowable ordinary loss on your income tax return. The IRS would not let you do this, however, if you had converted your timeshare property back to personal use before you sold it.
The exception is the property tax only if it is billed separately. They are also deductible if the resort differentiates it as a different item on your maintenance fee bill. You may also be able to deduct the interest on a timeshare loan, but, only if the loan is taken as a mortgage and there should be no other deductible mortgages except your primary home mortgage.
Sadly, not all timeshare loans qualify as mortgage loans as they are primarily termed as consumer loans. Also you have to keep in mind that you cannot deduct interest on multiple timeshare loans at a time if you also have a primary home mortgage. But you might be able to deduct interests on multiple timeshares if they are at same resort, as they can be viewed as one timeshare.
The timeshare property can also be used for donating to a charity. But there are some restrictions. If you want to donate a deeded timeshare, the allowable deduction is normally equal to the fair market value of the timeshare on the date of donation. If the fair market value exceeds five thousand dollars you will have to get a written appraisal that should meet IRS guidelines. In case of non-deeded and right to use timeshares which are considered as tangible assets, additional rules apply. The fair market value of the timeshare must be reduced by the amount equal to any gain that would have been made had the property been sold by the owner.
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.
by: Eric K Frey..
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