Timeshares and taxes

When tax season comes around many time share owners want to know what they can deduct, if anything.

Interest paid on a mortgage loan to buy a timeshare  is often deductible. The tax law allows deductions for most interest expense that an individual pays on a primary home and one other home, such as a timeshare or other vacation home.

You can treat a home under a time sharing plan as a deductible interest qualified home; if it meets all IRS requirements. The interest is deductible only if the loan is secured by the timeshare as a mortgage and you deduct no other mortgage interest except on your primary home. Note that most timeshare loans do not qualify because they are written as consumer loans rather than as mortgages.

If you have loans on more than two eligible homes, you may choose which two homes (one of which must be your primary home) you will treat as qualifying for interest deduction purposes. You may change your choice of qualifying properties from year to year. Many people with multiple properties, choose the one they have paid the most interest on, resulting in a bigger deduction.

If you have a timeshare week on a long-term lease (a Right-to-Use or “RTU”timeshare), the interest on a loan secured by that week will normally not be deductible. To be entitled to a tax deduction for interest expense in connection with such a purchase, you should finance it with a mortgage or home equity loan on your primary home.

Normally, interest expense and/or property taxes will be the only deductible expenses in connection with your timeshare ownership. A loan must be carefully structured for you to be entitled to that interest deduction. Property taxes may be deductible for timeshares if the property tax is separately billed or separately shown on the maintenance fee billing. This would usually be the case if you receive a property tax bill from your county of residence.

It may be wise to consult a tax expert with all your available loan and tax bill receipts. They would be able to narrow down what if anything you are able to deduct.