If you have owned a timeshare for any amount of time, you’re familiar with the ever-rising costs. Maybe you were OK with the annual maintenance fees, special assessments, and arcane rules at the beginning. But now your needs have changed, and you just want to be rid of the burden of your timeshare. There are a lot of ways to do that, but not all of them are equal.
One method that some companies have been aggressively advertising is donating your timeshare to charity. This can take a variety of forms, from a direct donation to a company that could use the accommodation to a company that will sell the unit and give the proceeds to the cause of your choice.
This option can sound attractive. In theory, it can get you out from under escalating fees and costs. Donation companies also advertise the ability to get a nice income tax deduction from the IRS when you file your taxes the next year. Donating timeshares, however, is not as easy as it sounds. Nor is the tax benefit, if it’s even available, as large as you probably hope it is.
In this article, we will look at the reality of donating timeshares and how the process really works. We’ll also turn a critical eye to that deduction on your tax return. Just how big is it, really? How much trouble is it to claim? Finally, we’ll look at other legal, ethical options for exiting your timeshare that are preferable to donation.
The United States government, through the IRS, encourages charitable donations by taxpayers by subsidizing those donations using money that would otherwise be collected as federal income tax. The thinking goes that if you are going to donate something of value to a charity, the value of that donation can be subtracted from your taxable income that year.
Donations are typically made to 501(c)(3) charitable organizations. These are companies that are designated under tax law as non-profit organizations that are exempt from paying federal income taxes. These include churches, other religious organizations, and private foundations.
This process is easy to understand for many of the goods and property we donate to charity. If you donate 10 shirts to charity, with each valued at $2, then the total amount of your charitable donation is $20. The same idea applies to more complicated donations, like houses. In order to tell what the value of real property is, though, an appraisal is usually needed.
Timeshare property interests are even more complicated in terms of valuations. First, they are fractional ownership rather than traditional real estate, so their value is both less than full ownership and more complicated to determine.
Second, timeshare ownership comes with annual maintenance fees and other obligations. Because it’s unlikely that the donor (you) wants to keep paying those costs after the donation, you will be passing them on to the 501(c)(3) organization that you want to help. This continued cost means you may even be costing the charity money with your donation!
Also, keep in mind that timeshare donation companies typically aren’t working for free. They may charge you processing, recording, or transfer fees that could cost you thousands of dollars. They’ll likely tell you that this cost will be offset by the tax deduction you will receive. A realistic examination of the tax deduction process, though, will show this to be unlikely.
So, let’s look at what a timeshare donation may actually get you in terms of a tax deduction.
The first thing to consider in taking a charitable donation deduction related to your timeshare is the value of the functional interest you are donating. Some owners may look to a resort website or literature and use that as the starting place for their valuation. Unfortunately, this is not a correct way to value any real estate, let alone timeshares.
Real estate appraisals, instead, are a measure of what any given property interest will sell for when compared to similar, recent sales of the same kind of property interests in the same area. The Appraisal Institute further cautions that special care must be taken when valuing timeshares. An appraiser with specific timeshare experience is a must.
Also, any appraisal should look at comparable sales of similar kinds of units in your resort. In reality, this means the timeshare resale market. Given that so many timeshare owners are listing their units for pennies on the dollar on eBay, the appraised value for most such units is likely to be quite low. A low fair market value of the timeshare unit means a smaller deduction.
Also eating away at the deduction is the cost that you are trying to avoid: the obligation to pay annual fees. This cost of hundreds of dollars per year may, in fact, make your unit worth less than zero. (Though we are not aware of any particular case showing this, donating a timeshare and being in a better financial position may technically be ruled by the IRS as income to you.)
Therefore, advertisements that donating timeshares can get you a fat income tax deduction are usually overblown. You can’t get a tax deduction for a timeshare you bought for your own personal use. Instead, it would have to be a business expense. Can you really say that you bought the timeshare to use it as part of your job? If not, there’s no deduction for you.
It’s also obvious, but worth stating anyway, that a charity has to accept your donation in order for it to go through. Finding a charity that is even interested in taking possession of such a low-value asset can be challenging, to say the least.
The truth is that the value of timeshares is low. That’s probably why you want to get rid of it, after all. Why would the IRS reward you for simply passing a financial obligation onto a charity that doesn’t deserve it?
In most cases, donating timeshares is an inferior option that doesn’t give as big of a tax write-off as promised, when it is even a possibility at all. It may even cost you money, after paying fees associated with the transfer. And your donation will probably be of limited use to the charity you are trying to help. So, are you just stuck with your timeshare, paying maintenance fees forever?
No. You have far better options. Centerstone Group is a company founded on pursuing multiple proprietary methods to legally and ethically get you the timeshare exit that you need. After evaluating the facts of your particular case, we will come up with the best possible exit strategy.
The best strategy in your case can include a pressure campaign on the company that sold you the timeshare unit. It can mean legal action with one of our trusted attorney partners. It can mean transfer to a receiver to ease your financial pain. And we won’t try to get you to dump your timeshare obligations on a charity that doesn’t need them — and probably won’t take them.
We encourage you to do your homework when looking at your options for a company to help you with your timeshare exit. Centerstone Group is accredited with the Better Business Bureau and consistently receives great reviews for its work. Give us the chance to help you stop the bleeding and get the timeshare off your back forever.
Maybe buying a timeshare in the first place was a mistake. We all make them; it’s nothing to be ashamed of. But don’t compound that mistake with another by rushing into a timeshare donation that, even if it were possible, would cost you money and time for very little benefit. Educate yourself about the options now so you can make the best decision for you and your family.
Centerstone Group’s professionals have over 33 years of collective experience in the timeshare industry. They know the business inside and out, and they can guide you through the options for helping you decide on the best course for your timeshare exit. Contact Centerstone Group today for a free consultation and case evaluation.