Regardless of whether you finance the purchase or pay cash for a timeshare, you will be stuck paying maintenance fees and taxes on an ongoing basis. This can become a major burden if you are financially strapped. If you simply stop paying these fees, it can damage your credit and end up costing you money in the future.
Maintenance and Taxes
With most timeshare purchases, when you set them up you have to start making a monthly payment to the timeshare company. This monthly fee goes to pay for the maintenance and upkeep of the property. It also covers the annual property taxes that you have to pay for the timeshare unit. These fees can vary significantly from one property to the next. In many cases, you will have to pay hundreds of dollars per month for these costs.
If you decide not to pay your maintenance and tax fee to the timeshare company, the timeshare seller will eventually take action against you to collect the balance. Many times the company will sell your debt to a collection agency. The collection agency will then start contacting you to try to collect the balance you owe. The collection agency may try to call you on a reulgar and send letters until you start making payments again.
When you start making your timeshare payments, the timeshare company or the collection agency may report this to the major credit bureaus. It will be reported as a default on a debt and will show up as negative information in your credit report. When this happens, it can lower your credit score and make it very difficult to obtain additional credit in the future. If you try to borrow money again in the future, you may have to pay a higher interest rate.
Walking away from your timeshare obligation can also come with some tax consequences, as the timeshare company will treat this as a foreclosure. This means that it could write off part of the money that you owe as bad debt. When this happens, the timeshare company can report this loss to the Internal Revenue Service. As a result, it will appear as if you benefited from a financial gain based on the debt that was cancelled. You can then be held responsible for the income tax associated with this financial gain.
How to File Timeshare Tax Deductions
Your timeshare can qualify you for a slew of tax deductions. You can, for instance, claim deductions for real estate taxes, mortgage...