How To Donate Your Timeshare And Put Money In Your Pocket

The question is often, can you get a tax write off for donating your timeshare. The answer is YES!

The first concern is where you live and what taxes you pay. Each country handles donations differently and don't expect anyone here to advise you on your place of residence. Beyond that, there is a LOT MORE to tax credit for donations than most people understand.

First, 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. If you have a $10,000 timeshare you could get only $1,500 in deduction credit.

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. This would give you $10,000 in deduction credit. In a 25% tax bracket, that's worth over $2,000 more in your pocket!

One difference between the two (there are variations) is that the first may deduct the costs of closing and commissions from your credit but they don't usually charge you anything else. The second may charge you a fee or ask for an additional donation since they are NOT selling the timeshare. Consider what you get back at tax time to see which gives you more money. Both get you out of your further lifelong financial obligations.

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. First of all, the $5,000 limit makes no sense. It's like saying your car isn't worth the same as one on the dealers lot because you can find it cheaper on eBay. Baloney, That's what Kelly's Blue Book is for - everyone and it's based on sales completed, not prices offered. Regardless of the difficulty, you have just as much right to sell at the same price as the resort does and unless you prove otherwise by selling it for less, the IRS says to use at least one of the three methods above to compute FMV.

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 you can contact me directly at SeniorDirector@CommunityHealthTraining.org or you can get further information at the website http://www.communityhealthtraining.org/Timeshares/

Dr. Rich is a retired physician with a past in commercial real estate before he entered medical school. He has taught thousands of patients and doctors specialty care for treatment in the field of physical medicine (therapy). Since retiring he has worked with various organizations as a consultant in health care, real estate investing and practice management. He has owned timeshares, donated, and currently works with a NPO to guide them in their timeshare donation program.

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