When it comes to understanding the financial implications of exiting a timeshare, you may be thinking, “Of course I understand them! I am paying a fortune in annual maintenance fees and special assessments, and I can’t afford it!” That is a reasonable response, but keep in mind that there are other financial effects to an exit that you may not have thought about.
This article will take a look at some of those topics that you should plan for when setting financial goals and thinking through your timeshare exit strategy. Chief among these concerns should be how you weigh the expenses of continued timeshare ownership against the potential impact of an exit on your credit score.
Some timeshare owners will also be curious about whether they can recover any of the money they have sunk into their timeshares, and if so, how much. Finally, we’ll talk a bit about the tax implications of selling your timeshare, to the extent there are any, and how you can figure those out with your tax professional or attorney so that you make an informed decision.
With the notable exception of a timeshare cancellation done within the rescission period, a timeshare exit will probably affect your credit score — and not in a good way — unless you have an expert on your side to make sure you do it correctly.
The connection between your timeshare contract and credit score is one of the ways that the timeshare industry manages to keep people in their contracts longer than they know is wise. That’s why you need someone helping you to make sure the impact is as light as it can possibly be.
First things first, when you exit your timeshare after the rescission period, it is possible that you will take a hit on your credit report. Several factors influence your credit score, but one with which you may be familiar is the repayment history for your various financial commitments and accounts.
When you take out a loan, use a credit card, or make another financial obligation, it’s expected that you will follow through. In some instances, as with timeshare purchase agreements, those obligations can be toxic to your credit and it makes sense to pull away. Your credit score, unfortunately, doesn’t distinguish between good and bad financial obligations — only whether you pay them back.
And if your repayment history is less than sterling — even for a good reason — it may go on your credit report and make it difficult for you to get favorable loan interest rates in the future. That means that borrowing money will just cost you more.
Therefore, when planning your exit, you need to make sure that you understand your timeshare obligations and the effect your exit will have on your credit score. The right timeshare exit company will go through the options available and help you pick one with little — or hopefully no — impact on your credit score.
Planning your timeshare exit with Centerstone Group will help you in this regard. Centerstone Group’s expertise and timeshare exit services will help you minimize the impact of a timeshare exit on your finances. For times when you absolutely cannot avoid a mark against your credit, Centerstone Group offers credit repair and monitoring services.
In most cases, you won’t be able to recover any of your initial investment when exiting a timeshare. The one exception is a timeshare rescission. When you cancel your timeshare contract soon after signing (within your rescission period, or cancellation grace period, as set by the state’s timeshare laws), you will get back the money you spent upfront.
If you’re past your rescission period and want to exit your timeshare, though, don’t expect to make your money back by reselling your timeshares. Most timeshares have very little or no resale value.
Unfortunately, a timeshare is not a standard vacation property. There is not much of a timeshare resale market because there aren’t that many interested buyers. It is nearly impossible to make money selling timeshares, outside of very few limited circumstances.
This reality comes into sharp focus when owners browse eBay or Craigslist and find hundreds of listings for $1. Even apart from that, listing a timeshare for sale could breach your timeshare contract terms. That may cost you even more money when your timeshare developer starts trying to charge you fees and penalties.
Though there are some so-called “timeshare resale companies” that may promise you a quick sale and profit, getting involved with them is a bad idea. These companies are usually scams, according to the state attorneys general, consumer protection agencies, and the Federal Bureau of Investigation.
Another red flag to watch out for is any person or company that promises that you can get all your money back by using their exit services. Outside of the narrow execution of a contract rescission, getting all money returned is not a realistic or achievable goal. Anyone who promises you this is trying to scam you. Run the other way.
The sad truth about timeshare exits is that getting out is more about triage than trying to get a big return on the investment. You need to stop the bleeding as quickly and efficiently as possible. If you are not a real estate professional, it can be hard to know where to begin. Therefore, the best way to get started is by calling experts, like those at Centerstone Group.
Because everyone’s income and financial situations are different, it is tough to say what specific tax consequences there will be for every timeshare owner seeking an exit. The legal complexities of taxation prevent there from being one good answer without seeking professional advice.
A tax benefit to getting rid of your timeshare is that you won’t be paying any further taxes or timeshare fees on the timeshare. Depending on the exact legal arrangement of your timeshare, you may be paying a portion of local real estate taxes for your interest. By getting rid of the timeshare, that tax bill would go away.
In some cases, a timeshare exit may end with the developer deciding to “write off” or cancel debts you have to the company. In that case, the IRS would consider the written-off debt taxable income to you. The developer would issue a form 1099-C, which you’ll have to report when you file your taxes. In that way, exiting a timeshare might result in a temporary increase in your income tax for a year.
But even if your developer issues the 1099-C, there may still be a net-zero tax effect. When this level of documentation and the IRS are involved, you want to ensure that you have experts working on your side. Centerstone Group can help you get the best deal and make sure that the impact on your taxes is minimal.
When considering the impact of a timeshare exit on your taxes, it can be hard to know and plan for the future. Talking with your timeshare exit company can give you some clarity about what to expect. Depending on how complicated your situation is, they may also recommend speaking to an accountant or tax lawyer.
Questions about finances and taxes are always going to be tough. Handling these questions yourself, as a layman, is tricky and might end badly. Thus, it makes sense to have an expert on your side who can tell you about the best way to get out of your timeshare without creating more financial burdens.
As the top timeshare exit company accredited by the Better Business Bureau (BBB), Centerstone Group has handled thousands of exits and guided its clients to good financial outcomes using a variety of successful exit options. Centerstone Group’s A+ rating with the Better Business Bureau and 4.78-out-of-5-star customer reviews speak to our expertise and ability to handle a wide variety of exit scenarios.
Before you start making your timeshare exit, contact Centerstone Group for a free consultation and case evaluation. It won’t cost you anything, but it will help you with understanding the financial implications of exiting a timeshare and your financial obligations under the timeshare agreement, so that you can move forward with confidence.
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