Before you ask how to claim timeshare on taxes, assess what type of property you own. A timeshare can be deducted on one’s taxes if (and only if) you bought it for the main purpose of running as a rental business or if it’s a deemed a deeded real estate interest. Like owning a real estate property like a house, the latter can write-off mortgage interest and property taxes off a timeshare unit.
If it qualifies then, there are specific tax deductions that may be claimed such as maintenance fees on timeshare rentals, loan interest payments, property taxes, rebates on the donation, rental-use and so on. As mentioned, learning how to claim timeshare on taxes must first start with an assessment which involves your property’s ownership status. Additionally, tax deduction can only be claimed on a single timeshare. If you own two or more, quite frankly deductions can only be done on a single property. Also, state and local tax implications can vary.
When you qualify, claiming tax deductions on timeshare properties normally involve the following steps:
- Itemize income tax deductions carefully by attaching Schedule A to a tax return form– and not posting a claim on standard deduction.
- Add up property taxes of timeshare on another real estate you own. A separate property tax bill may be sent out to you which should be segregated from your maintenance fee statement for it to quality. If it isn’t separated from the property tax bill, ask your timeshare management team to do so.
- Indicate total property tax expenditure on Schedule A’s line 6. Try combining mortgage interest payment on a primary residence with that of the mortgage annual interest payments on your timeshare as indicated on 1099 form provided by the lender. If you have a home equality loan as payment for a timeshare, write it off instead as a home equity debt.
- For the total combined mortgage interest, indicate this on Schedule A- Line 10. Add the rest then, write accumulated total deduction on Form1040-Line 40 of the tax return.
Be reminded though that the IRS only allows write-offs on the interest of a maximum of 2 homes. Interest write-off is also limited on the first $1M home purchase debt as well as first $100,000 home equity debt.
Are timeshare assessment fees tax deductible?
Often, special assessments done on timeshare are not deductible from your taxes. Such fees are considered to be under major repairs, improvements or any unexpected expenses deemed not eligible for a claim. These assessments are also deemed not paid for the aim of paying taxes to a particular state or a particular local government. According to legal experts, even one-time local tax like say installing a new sewer or drainage system in the resort’s neighborhood won’t still be eligible for tax deductions.
Are timeshare maintenance fees tax deductible?
Yes – but only if timeshare property is registered under a rental property. Even if you own the property, if it is not for rent then, such fees can be considered as just part of maintenance and home improvement. As we all know, such fees are not tax deductible. If you own a rental timeshare, however, you may also claim for rental-use tax.
So, how to claim timeshare on taxes? It all depends on what type of timeshare you own. If it’s for rent then, certain tax deductions apply. If it’s for personal use then, other concerns may need to be verified and assessed. When in doubt, it is best to consult with a tax professional in your area of concern to prevent any lapses in your tax returns. This way, you can never go wrong when the IRS does a routine audit on your name.