Tax season is not normally anyone’s favorite time of year. Trying to figure out what costs are deductible and what is not, can make your head spin. The purpose of this series of articles is to break down the tax law involved with timeshares and explain them in plain language so everyone can understand quickly and easily. This article is going to explain what you can expect when you donate your timeshare property.
Donate For Charity Not For Taxes
If you are looking to donate your timeshare property to a charity, your noble intentions will not go unrecognized by the government. The Fair Market Value of your deeded property on the date of sale will typically be equal to the deductible contribution amount. Fair market value does not refer to the price in which the developer is selling, it is what the value would be on the resale market at the time of sale. If the fair market value is estimated to be over $5,000, a written appraisal must be made, based on IRS guidelines.
Right-to-Use properties and points based timeshares come with their own set of rules. Fair market value is reduced by the amount of any gain that is made, such as during a sale or auction, if the property is used by the charity for any other purpose than it’s original and intended use. This reduction of value is the same as if the donor had made the sale themselves. If the fair market value is $1,000 and is sold for $1200, then the gain made by the sale or auction is $200. That would then reduce the deduction amount to $800 ($1000 fair market value – $200 gain from sale = $800 deduction).
Is Donating Just For Tax Deductions Worth It?
If you are still intending to donate your timeshare for tax break purposes, it will be a waste of time and you will be better off selling your ownership and keeping the money. Let’s say you are in the highest tax bracket, meaning that you will get a maximum 35% back based on your deductions. If you sold your timeshare at fair market value for $5,000, that money is in yours. Donating your timeshare valued at $5,000 would only give you a $1750 return on your income tax.
The conclusions of this article are the opinions of the author and are not intended to take the place of a licensed tax professional. Make sure you obtain professional advice when you file your tax return.
If you would like a free consultation for buying or selling a timeshare ownership, feel free to contact us.