Timeshare Tax Benefits
Timeshares are vacation properties where ownership is split between several different parties. When an individual buys into a timeshare, he purchases the right to use the property for a specific time period each year. Buying a timeshare can be a way to have a vacation home without having to pay a property outright. Timeshares may offer tax benefits similar to purchasing a second home.
Loan Interest Deduction
Although buying a timeshare may be less expensive than purchasing a second home, timeshares are often located in prime vacation areas. Even a one- or two-week stake in a timeshare can cost thousands of dollars. Many timeshare owners finance their purchase using mortgages just like they would a normal home. Timeshares financed with mortgages (loans where the equity is used to secure the loan) may be eligible for a tax deduction on loan interest. If you purchase a timeshare with a personal loan that the equity of the properly has not secured, you will not be eligible for the interest deduction. Interest can amount to hundreds of dollars in monthly payments, so the savings of an interest deduction can be significant. Mortgage interest is only tax deductible on a primary residence and one vacation property or second home. If you have more than one timeshare, you will only be able to claim the deduction on one of them.
Property Taxes
Timeshares are often similar to condominiums in that you may have to pay a maintenance or upkeep fee to the building owner. The cost of property taxes may be passed onto timeshare owners though the maintenance fee or they may be assessed as a separate property tax bill. Property taxes charged on timeshares may be tax deductible; it may be easier to deduct property taxes on a timeshare if you receive a separate bill for the tax or if your maintenance fee explicitly states the amount you are paying toward property taxes.
Rental Units
If you own a timeshare, but rent out some of the time instead of using the unit yourself, certain costs associated with the timeshare and renting may be tax expenses. For example, maintenance fees, insurance costs, depreciation and rental advertising costs may be tax deductible. The IRS requires that vacation homeowners put the property to personal use at least 14 days to qualify for the home mortgage interest deduction, according to Bankrate.
