One option to get rid of a timeshare that has become increasingly popular is donating a timeshare to charity. This solution is often recommended by accountants and financial advisors because of the potential tax benefits. If you are able to donate your timeshare to a charity, you’ll be able to take a charitable tax deduction on your taxes provided that you itemize your personal deductions on IRS Schedule A. The deduction is equal to the fair market value of the timeshare at the time of the gift, minus the amount of any depreciation.
However, there are pitfalls to donating the timeshare to a charity. The first is the amount of the tax write-off you can take. Many people are tempted to take a five-figure write-off based on what they paid or what the timeshare resort is now charging for the timeshare they are donating. However, the charity you donate the timeshare to has to report the “fair market value” of the timeshare to the IRS. This amount is often much less than is reported on your taxes which can lead to obvious tax issues for the donating individual.
The other common pitfall is that there are costs associated with transferring the title of the timeshare to the charity. If the “fair market value” of the timeshare is less than the transfer fee you may actually lose any benefit of the tax write off because the out of pocket fees are greater than the tax write-off. If a charity contacts you about donating your timeshare and tells you they have a company that transfers your timeshare to the charity for a fee, be on the lookout as this could potentially be a scam.
These pitfalls also extend to the charity and may not actually be a benefit to the charity. The timeshare may only generate minimal income for the charity and take valuable time away from the true purpose of the charity. In the worst case scenario, the charity may actually lose money on the timeshare donation because they are responsible for the maintenance fees and assessments. If the charity cannot find a way to make a profit from the timeshare through an auction or rental they are still stuck with these fees. This pulls resources from charitable purposes and gives them to the resort. If philanthropy is your true purpose in donating your timeshare you are better off writing a check directly to a charity of your choice.
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