It’s tax season again and the time of year that many disgruntled timeshare owners begin to wonder about donating their unwanted timeshares.
Several years ago, a few different organizations started investigating the donation process and uncovered many hidden costs associated with timeshare “donations,” in additional to a slew of related scams, and a host of potential tax problems. As a result, the United States Justice Department publicized an official widespread crack down on timeshare donations for consistently overvalued tax fraud deductions. With so many complications involved in the process, can a timeshare be donated for a Tax break?
The answer? How do you get a Tax Break for a “Worthless” donation?
Unlike old clothing, toys, or furniture, that are often donated because they may have a small value, because of required annual fees, timeshares actually carry negative value which can make them exceptionally difficult to donate. As a result, many charities refuse to accept gifts of timeshares strictly because of financial reasons, such as the annual costs of timeshare ownership and no resale value.
For those organizations that will consider a timeshare donation, the timeshare must be fully paid off and have no outstanding maintenance fees or loans. The organization may utilize a third party to receive and process timeshares, and require the owner to pay the charity or third party a large sum to cover all or part of the future maintenance fees, creating the potential for scams and fraud.
The idea is that the timeshare must have marketable value and be able to be sold in order to be donated. As timeshare owners already know, timeshares are a continually depreciating asset that are worth very little, if anything at all. Because of this, it can be impossible to find a buyer who is willing to take on a contract that will inevitably cost them thousands of dollars in annual fees that constantly increase each year—as evidenced by the many timeshares listed for sale for only $1 on CraigsList and eBay that have not sold. This same principle holds true for donations.
IRS Tax Law prohibits a deduction for donating the “use” of a timeshare to charity, so the only deduction that can be claimed is the value of the ownership of the timeshare. The only actual charitable deduction that can be claimed is the “fair market value” of the timeshare at the time of the gift, minus any depreciation deductions. To clarify: the fair market value at the time of the gift is what an owner would have been able to SELL his/her timeshare for on the date of the donation. Since, as we discussed above, timeshares hold an inherent negative value, most timeshares will not have ANY fair market value to deduct, and the owner will receive no tax benefit at all. If a timeshare owner overvalues their timeshare donation, they may be charged with IRS tax fraud.
Those precious few timeshares that have some market value may qualify for a donation, but additional steps must be followed before a write off can be claimed. Special forms may be required, along with official appraisals that can be technical and costly.
If you are considering a timeshare donation, remember the following tips:
- Only do business directly with reputable charities (contact them through their website’s “contact” page). Make sure the organization you are considering is legitimate and be sure any real estate brokers or businesses involved in the transaction are licensed and verifiable. Use the Association of Real Estate License Law Officials, “Arello.com.” See these other helpful links
- Make sure your timeshare has real, marketable value. Consider having a private appraisal done by a licensed real estate appraiser beforehand, so you know what (if any) the fair market value of the timeshare actually is.
- If you choose to claim a tax deduction, and can find a reputable charity you know that is willing to take the timeshare as described above, consult a licensed tax attorney to help you with the process.
Donating a timeshare is a complicated process and takes patience. If your timeshare does not qualify as a valid timeshare donation, or for timeshare resale, remember there are other ways of disposing of an unwanted timeshare. You may be able to escape the burden of an unwanted timeshare by divestment through settlement with the resort (if your timeshare is a resort such as Wyndham, Hilton (Diamond), Marriott (Welk), Hilton Grand Vacations, Club Exploria, InnSeason, Grand Sol Mar, The Ridge Tahoe, Grand Timber Lodge, Berkley Group (Vacation Village), Capital Resorts, Holiday Inn (Orange Lake and Silverleaf), Bluegreen, GeoHoliday (Sapphire/Starpoint), Grupo Mayan, Pueblo Bonito, and the Villa del Group in Mexico.
Call The Timeshare Law Firm at (321) 224-1111 for a case evaluation with a licensed Attorney. We will discuss remedies available to your specific case, so you can make an informed decision as to what is the right strategy for you.
Since 2004, we are Consumer Protection Attorneys solely dedicated to fighting for [Timeshare Owners] Consumer Justice!
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