What You Should Know On Timeshares: Tax

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A lot of people have this misconception that sales on timeshares are not taxable. But the truth is, timeshare sales still need to pay tax. The treatment of timeshares is still like any other form 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. However, you need to be the owner of the property for over a year before it can be eligible for income tax. You can add the costs connected to buying the property, like the closing costs when you bought it, the yearly maintenance costs for each year you’ve owned it and any other special assessments.

But also like other real estate properties, when you incur a loss in selling your timeshare, it is called a capital loss that you wouldn’t be able to deduct in your tax returns. But situations might differ if you regularly rent the unit; any loss you incur on a sale will be classified as an allowable business loss allowing you to deduct them from income tax returns as an allowable ordinary loss. If the unit had been turned back to personal use prior to its sale, the IRS will not allow losses on the sale.

There are no more deductions permitted against timeshares. Property tax is an exception, but only when it is billed separately. If this is listed as a different item on the bill for maintenance fees by the resort, it can still be deductible. Interest on a timeshare loan may be deductible but only if the loan is taken as a mortgage and there are no other deductible mortgages besides the primary home mortgage. Sadly, most timeshare loans cannot qualify as mortgage loans since they are typically listed as consumer loans. You should also remember that you can’t deduct interest on several timeshare loans at the same time if you already have a primary home mortgage. It might be possible to deduct interests from multiple timeshares if they are in just one resort as they can be seen as just one unit.

The timeshares can also be used for donating to a charity. There are restrictions, however. If you intend to donate a deeded timeshare, the allowed deduction is usually equivalent to the timeshare’s fair market value at the time of the donation. If the fair market value goes over 5,000 dollars, you will need to get a written appraisal that meets IRS guidelines. Additional rules may apply for other types of timeshares like the non-deeded and right-to-use timeshares since they are considered to be tangible assets. The timeshare property’s fair market value has to be reduced by how much the timeshare owner would have gained if he had sold the timeshare.

As for renting timeshares, expenses can be deducted including costs for advertising, deprecation, maintenance fees, and rental commissions. Certain kinds of special assessments may be deductible like repairs and unexpected expenses. Spending for travel and remodeling are not deductible.

You should also remember that rules for vacation homes would apply if you use it for personal use for at least 15 days every year. Timeshares should be used for at least 15 days for them to qualify.

Check with us first to determine if there are any Marriott timeshare resale restrictions Visit us to learn about all the possible Marriott timeshare resale restrictions

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