Are timeshare losses tax deductible? A timeshare or vacation home is considered a personal capital asset and the sale is reported on Schedule D. A gain on such a sale is reportable income. If you incurred a loss on the sale,
the IRS doesn’t allow you to deduct the loss
.
The property tax that you’ll pay for your timeshare is similar to the tax you would pay for your primary home
. Depending on your timeshare management company, you may have your property taxes bundled in with your maintenance fees. Otherwise, they might be billed separately.
The gain on the sale of a timeshare is taxable for federal income tax purposes
. The gain should generally be reported on Schedule D.
You can also depreciate a portion of the value of your timeshare every year
, writing off a small proportion of its fair market value every year as another subtraction from your rental income.
If it is a personal, vacation timeshare then yes, it is
. (If it’s a timeshare you rent out it’s considered rental property, not a second home.)
Failing to pay your debt to a timeshare company
will have you sent to a collection agency and could eventually place you in foreclosure
. However, not all companies push for legal reparations and instead will constantly harass you with collection efforts.
(1) Determine the full value of resort properties, condominiums, cooperatives, or other properties not marketed in increments of time but which are comparable to the subject property in terms of size, type, and location. Divide such full value by a unit of time equal to the timeshare interest being valued.
A timeshare is not an investment, it’s a vacation.
It’s also an illiquid asset that is likely to lose value over time
. Ultimately, timeshares are like swimming pools, if you buy one, do so because you love the idea of owning it, not because you expect to make a profit.
You can deduct interest on a timeshare if it is deeded and recorded in public records and it meets all the requirements for deducting mortgage interest
. If you rent out the timeshare during the year, you must also use it as a home for more than 14 days or more than 10% of the number of days it is rented.
Q: How do I calculate depreciation? A:
If this is the first year of ownership, take 3.485% of your cost (the amount you paid for your timeshare) as a depreciation expense
. That’s based on an IRS table.
Because they are divided among multiple individuals, timeshare owners rarely see an appreciation in property value
. Therefore, timeshares are often thought to lose value over time.
The taxes assessed must be separate from any maintenance fees (the two are sometimes lumped together in timeshare bills). You may need to
request an itemized statement from your timeshare management to prove you paid property taxes
.
- Use the rescission period.
- Call the timeshare developer.
- Rent your timeshare out.
- Sell your timeshare on the resale market (but expect to take a hit).
- Gift your timeshare to a friend, family member or stranger.
Debt always catches up with you, and it needs to be paid at some point. Like it or not, timeshare maintenance fees are a personal responsibility—until they’re not.
If you really want to be free of them, then getting rid of your entire timeshare is your best option.
The short answer is “yes.” When you take out a mortgage loan for a timeshare purchase, you sign an agreement to make monthly payments on the timeshare until the debt is completely paid off (generally for a period of 10 or 15 years).
Costs to Get Out of a Timeshare
On average, it costs about
$5,000 to $6,000
and takes 12–18 months to get out of your timeshare contract using a timeshare exit company. But the cost and the timeframe can vary depending on a number of factors including, how many contracts are attached to your timeshare.
If a repayment plan isn’t negotiated, the timeshare company might go the route of taking you to court for breach of contract to get a judgment against you and place a lien against the property
. Ultimately, they will foreclose on the property.
Once the owner of a timeshare dies,
the timeshare is now subject to probate
. Having a will doesn’t avoid probate, but rather, it instructs legally how the assets (such as the timeshare) should be distributed.
If you die owning a timeshare,
it does become part of your estate and obligations are indeed passed onto the next-of-kin or the estate’s beneficiaries
. However, they do not have to accept it, in the same way that anyone has the right to refuse any part of an inheritance.
There are two different types of timeshare contracts you can purchase: a deeded ownership and a Right To Use timeshare.
With a deeded timeshare, you own an actual fraction of the property through a deed
. Right To Use (RTU) gives you the right to vacation at the property.
If you stop paying your timeshare maintenance fees,
you will likely default on your ownership
. This not only hurts the resort, but it hurts you and your credit. Like a home going into foreclosure, the resort takes the ownership back and it will stay on your credit report.
For the majority of timeshare owners, the property is located in a state other than their state of residency. In order to avoid probate involving the out-of-state timeshare property,
you need to include the timeshare in your living trust
. This will avoid complications down the road.
Deeded timeshares are considered
real estate not personal property
. You own property rights to a deeded timeshare until you sell it, until the time frame on the contract expires, or until you pass away. You maintain partial ownership and equity in the property, which you share with the other timeshare owners.
Reporting the sale of a timeshare or vacation home:
A timeshare or vacation home is considered a personal capital asset and the sale is reported on
Schedule D
. A gain on such a sale is reportable income. If you incurred a loss on the sale, the IRS doesn’t allow you to deduct the loss.
Claiming the Deduction
Your mortgage lender should send you a Form 1098 that documents how much interest you paid on your timeshare mortgage during the year. To claim your timeshare mortgage interest, you need to
itemize your tax deductions, using Schedule A
.
- You Don’t Have to Think About Where You’re Going on Vacation. …
- You Don’t Have to Maintain the Property. …
- It Can Be More Financially Accessible Than Buying a Vacation Home. …
- You Can Buy a Secondhand Timeshare for Less.
Can you write off Disney vacation Club?
No, you cannot write off the annual dues and operating expenses that are paid each month
.
Your timeshare is actually a CONTRACTUAL OBLIGATION
. It’s a contractual obligation where you agree to keep paying MFs until the end of time. The problem for your family is they can’t just disclaim the timeshare because the liability is still there. The liability attaches to your estate.
Most people trying to sell their timeshares aren’t businesses, and so don’t have those costs to recoup
. This helps keep the prices low, even though they’re selling the same thing as the developer or resort. Additionally, businesses can afford to wait for a while to find a buyer that’s willing to pay a higher price.
Having a deeded ownership means your timeshare is yours forever
. Enjoy it with family or friends, rent it out to other vacationers, and pass it down to relatives when you’re done using it.
Less flexibility for vacations
– Perhaps one of the biggest drawbacks to owning a timeshare is that many of them don’t allow much flexibility when it comes to planning your vacation. Every timeshare owner is allowed a certain time period each year to use the property.
- With your return open in TurboTax, search for 1098 in the search box and then click Jump to 1098 link in the search results.
- Type in the name of your mortgage company on the Enter Your Mortgage Lender screen.
Dave Ramsey says
you get nothing out of paying for a timeshare except the loss of choices and the loss of your money
. Timeshares are seriously a terrible use of your money!
To start with, you can use sites like
eBay, Craigslist and Timeshare Users Group
. Also, look for “sold” listings. They’re a more accurate indicator of price than one that’s only listed (which is often the wishful thinking of what an owner wants to get for their timeshare).
Trading for time at another resort may be difficult or impossible, depending on how desirable the location of your timeshare.
High fees and low flexibility combine to make timeshares more difficult to sell
.
A timeshare is not an investment, it’s a vacation.
It’s also an illiquid asset that is likely to lose value over time
. Ultimately, timeshares are like swimming pools, if you buy one, do so because you love the idea of owning it, not because you expect to make a profit.
