As your timeshare costs grow, you may be wondering how it all fits into your tax picture. The good news is that some of your timeshare costs are tax deductible. But others are not. To be sure you know what can and can’t be written off, let’s break down the legal tax deductions for your timeshare.
Maybe the only thing you ever expected from your timeshare was an annual week somewhere beautiful and a break from all your troubles. But if you’re like most owners, you probably ended up borrowing money to get a timeshare in the first place. And let’s be honest—it’s hard to enjoy the beach when you’re drowning in debt.
Unfortunately, if you bought your timeshare with a loan from the timeshare company itself or with a credit card—and that’s a whole different sermon—you won’t be able to deduct the loan interest.
Here’s something to lighten the load a little: If your timeshare loan is secured, the interest you paid on it will usually be tax deductible! But what does “secured” mean? In case you don’t know the difference from the original purchase loan, a secured loan is either:
If you have a secured loan for your timeshare, you can write the interest off. We never recommend debt, but if your loan is secured, you can at least alleviate a bit of the financial pain by writing off the interest.
So why did we say the interest expenses on secured timeshare loans are usually deductible? Because there’s an exception. (Of course there is.) You will not normally be able to deduct the interest paid if your timeshare week is through a long-term lease, also known as a “right-to-use” or “points-based” arrangement.
To guarantee you’ll be able to take advantage of this deduction when filing, be sure your deeded week appears in the loan document as the security for the loan. If it doesn’t, be prepared to get a document from the seller clearly stating that your deeded week is the loan’s security.
Sorry to say, your maintenance fees are not deductible. The resort where you have a timeshare uses these fees to pay for everything from landscaping to amenities and business costs, and the average annual cost is around $1,000. 1 In case you haven’t noticed, fees tend to rise by 5% a year. So not only are they ineligible for a tax write-off, they’re only going to be more of a budget buster as time goes by.
There is one tax exception for maintenance fees. You can write them off if, and only if, you paid them while renting out the timeshare to other people.
Yes, you can get a deduction from the property taxes you pay on your timeshare. Just be sure you follow the rules to make it stick:
Renting out your timeshare? You should know that you’ll nearly always need to report that income when filing with the IRS. But you may be eligible for a tax deduction. The IRS has a few limits and rules about which rental expenses are tax deductible:
No matter how steep the closing costs were on your timeshare, the bad news is they’re not deductible for tax purposes. Legal fees are also ineligible for a write-off.
What about giving your nightmare . . . err, timeshare away to charity? If you donate it, you will be eligible for a tax rebate in the amount of your property’s fair market value. To be sure your claim flies with the IRS, you’ll need to have an independent appraisal done and keep that documented.
Timeshares have a lot of rules and regulations—especially in the tax realm. To be sure you get the tax help you need and the money you deserve, you’ll want to connect with one of our Endorsed Local Providers (ELPs) in your area for tax help today.
