Monday, July 13, 2009

Tax Deductions for Timeshare Owners

Do you know what expenses you, as a timeshare owner can deduct on your tax return? The answer is not the same for everyone. Here’s some details from David H. McClintock, CPA, regarding the most common deductions and how they might affect you, depending on your particular situation. This information can be best used as a starting point for discussions with your own personal accountant who can then advise you on the best course of action.
  • Interest Expenses
    In addition to your primary home loan, the interest you pay on a loan that you used to buy a timeshare week is often deductible. But, if you have two separate loans, such as one for a vacation home and one for a timeshare week, you can only choose one of those to deduct, in addition to your primary home.

  • Secured Loans
    If your timeshare loan is secured by the financed property, then the interest is deductible. If you used a home equity loan to finance the timeshare week, that qualifies. If your current loan is not secured, you could consider refinancing the mortgage on your primary home for a higher loan amount, and use the proceeds to pay cash for your timeshare week. Non-secured loans include: Credit cards; loans offered by the timeshare developers (Check your paperwork to be sure); Right-to-Use (RTU) timeshare loans. Based on the amount of debt for the properties, your deduction amount may be limited. Generally, the total debt cannot exceed $1,000,000 of mortgage (property acquisition/improvement) debt and $100,000 of home-equity type debt.

  • Property Taxes
    Property taxes should be deductible unless the property taxes are neither directly billed to you nor separately stated on your maintenance fee billing. This is usually because the timeshare resort has been assessed and billed for property tax as one parcel or parcels bigger than just your individually owned week. If the tax is not assessed against your individual ownership, you may not use it as a deduction. There is no limit to the number of properties for which you may deduct property taxes, however, maintenance fees are not deductible.

  • Assessments and Expenditures
    In general, special assessments by your timeshare association are not deductible because they typically represent fees for improvements, major repairs or unexpected expenses. Closing costs and legal expenses related to the purchase of your timeshare are not deductible and should be added to the purchase price to determine a total cost of your week from a tax perspective.
For most timeshare owners, interest expense and/or property taxes will be the only expenses you can deduct, but, you should always consult with your tax advisor to determine your particular tax situation.

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