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Selling Timeshares at a Loss: Vital Tax Information

Do you know why most people dread tax time when they have sold a property, especially when it's regarding selling timeshares? This dread comes from the taxes one must face every April 15th. Selling timeshares is slightly different when it comes to taxes, but nonetheless they do factor into your tax payment. For those who will have to sell their timeshare at a loss there is some vital tax information below to help you. We will discuss timeshare tax deductions and what you might be able to do to lower your owed taxes. 

When you sell your timeshare at a loss it is not usually deductible. The government looks on timeshares in two ways. You have fractional timeshares in which you actually own a piece of the title to the property. You also have timeshares that remain the property of the resort or management group and all you do is buy "time." Fractional timeshares are a lot like selling property or homes. If you sell a home at a loss you still owe money to the government for the sale. When you're selling timeshares that are based on a week rental at a resort you do not actually have property and in that respect the government views any money as additional income.

There are four factors which can help you reduce the amount you owe on your taxes

The closing costs, any improvements and the maintenance fee, special assessment requirements, and the original cost of the property count. Fractional timeshares include all four factors; however, the other style of timeshare does not typically include the amount you paid for the privilege of using the resort property.

In other words, as expenses listed on your taxes you can state that you had a maintenance fee, any special fee, and closing costs if there were any to the sale. These deductions will help count against what you would owe for the sale of the timeshare. 

Now there is a way you might be able to get a deduction for a loss when it comes to selling timeshares. If you have a fractional timeshare and convert it to rental property it will help you with your deductions. In this instance the deductions are based on fair market value rather than what you paid for the timeshare originally. It is also not as easy as converting the timeshare to a rental property in the same year that you sell it. Instead you have to use the timeshare as rental property for at least two consecutive years, and some states may require more than that. You also need to know when selling timeshares that you cannot convert the property back to personal use before selling it and hope for the loss to count. 

Seek professional advice

The best advice that can be offered is to seek your accountant regarding selling timeshares. They will be able to help you with the difficult tax issues surrounding your timeshare, even offering suggestions on how to lower the taxes you owe regarding loss.