Is Donating Timeshares a Good Way to Get Rid of Them?
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 Process of Donating Timeshares
donating timeshares: Woman watching an elderly woman sign a document
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.
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