Tax Credits for Timeshares
Owning a timeshare is very similar to owning your own vacation home. Timeshares are usually luxury units with plenty of amenities. Timeshare units can draw well over $10,000 for a single week. If you are the owner of a timeshare unit it is very important to assess the level of tax credits in your favor to offset some of the costs incurred due to your ownership of the property.
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What Is a Tax Credit?
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Tax credits make up the sum of money deducted from the amount of taxes a citizen owes to the state. Credits, or deductions, for taxes my be granted in a variety of ways. Income tax deductions and property tax deductions are two examples of how tax credits may be assessed in different areas. Tax credits may also be granted based on a subsidy or to encourage investment. Occasionally, tax credit may be refundable, requiring repayment to the extent exceeding the relevant tax.
What Is a Timeshare?
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Timeshares grant ownership or right to property use. Timeshare properties are usually resort condominiums that grant multiple parties the right to use the property. Each owner in the timeshare is allotted a specific period of time in which they may use the property. Timeshare units may be on a part-ownership or right-to-use basis.
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When the Unit Isn't Rented
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If you choose to use your timeshare rather than renting out the space to someone, the property taxes within your annual maintenance fees are deductible provided you can itemize your deductions. Additionally, if you borrowed money to purchase the unit, the interest expense you pay is often deductible also. Utilities and association charges are nondeductible expenses.
When the Unit Is Rented
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By renting out your timeshare unit for any portion of the time that you're allotted, taxes on the unit become more complicated. Tax law assumes that you can determine the deductible portion of the expense based on usage of the timeshare unit overall. However, since pinpointing the exact amount of time that a single unit has been rented during the course of a year can be difficult, many timeshare owners base their calculations on how the timeshare was used during their period of ownership.
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References
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