Original Message:
Re: Has anyone ever donated a timeshare for a tax write-off? (by Ken R.):
mariam201 wrote:Has anyone ever donated a timeshare for a tax write-off? I would be curious to hear how easy / expensive it was to do.
The answer is YES, you can get a tax write off for donating your timeshare. However, there are a few things you need to consider. 1. The write off is against your income like an other deduction, not a tax credit. 2. You have to find a non-profit organization (NPO) willing to accept your timeshare. 3. You have to be careful how your timeshare is evaluated.
Let me give you a little background. I work with a NPO that does accept timeshares. So I have a fair idea of what I'm talking about.
When you attempt to donate your timeshare you will often find that the NPO puts you together with a broker who actually sells your timeshare for whatever they can get for it. The NPO doesn't take title except at the very last second in a double closing so you are donating it to them while they are selling it to someone else. When that is done, you face a few hurdles. Some timeshares at some resorts NEVER sell and those will be rejected outright by the NPO. Until the broker sells it you continue to be responsible for all fees. When it is sold, a value is established which can't be argued with. "Your" timeshare was only worth what someone actually paid for it, therefore according to the IRS you can only deduct the amount that was actually received. Even if you have an appraisal, it doesn't matter. Even if the NPO takes title and holds on to the timeshare for awhile, if they do sell it, they are required by law to notify you if the sale price is different than the credit they gave you so you can adjust your future income deductions up or (more likely) down to coincide with the real sale price.
The NPO I work with does it differently and you may find some others that do this, also. The NPO takes title now and NEVER sells it. As such they are required by the IRS to find the Fair Market Value (FMV) based on one of three methods dictated by the IRS. 1.) What do the majority of similar timeshares sell for in the open market. Think about this for a moment. The majority are sold by the resort, therefore their sale price along with what you willingly paid for it establishes FMV. 2.) What is the rental income determine as an investment if it was bought for that purpose (doesn't apply here). 3.) What would it cost you to replace the timeshare on the open market. Again, think. You would probably have to go to the resort and pay their retail price. Therefore, if your unit is NOT sold, the FMV can be fairly and legally established as the price close to the retail price currently at the resort. That value is then your deduction. The difference can be literally thousands of dollars difference.
Two questions often arise. 1. How can the NPO take over the financial obligations and continue in business? That is a business trade secret, but I can tell you they often work our something with the resort to retire the unit. 2. Isn't there a $5,000 limit on timeshare donations? NO!! I've read this many, many places EXCEPT from anything from the IRS. Their only response is to review two publications - Pub. 561 Fair Market Value Determination and Pub. 526 Contributions.
I hope this hasn't been too technical or overwhelming for you, but I felt you deserved a technical answer. If you would like further information go to http://www.CommunityHealthTraining.org/Timeshares/ or you can contact me directly at SeniorDirector@CommunityHealthTraining.org
Dr. Ken Rich