Tax Issues in Donating a Timeshare to Charity

Donating a TimeshareDonating a timeshare to charity usually seems like an enticing way to get rid of a timeshare due to the possibility to get a tax deduction following timeshare donation.

Timeshares are vacation villas or condos that several people share the ownership and usage of. When you buy a timeshare in the United States you will usually have legal deed to the timeshare property. The title to the property will usually include your name, as well as the names of the other timeshare owners, on the deed.

You are allowed to legally get out of your timeshare contract whenever you choose, as would certainly hold true with other types of real estate holdings, by selling or giving away your timeshare interest. Regrettably, there is a nearly non-existent demand for re-sale timeshares. When and if timeshares are actually sold, it is almost always at a huge loss as the bottom has completely dropped out of the market and there is a glut of available timeshare properties. It’s usually not possible for timeshare owners to succeed in selling their timeshare interests for any amount of money.

Consequently, quite a few timeshare owners attempt donating a timeshare to a charitable organization. Nevertheless, lots of charities decline to accept timeshares in donation due to the annual fees that are required to be paid by any timeshare owner.

Tax Deductions and Timeshare Donation.

If you’re successful in donating a timeshare to a not-for-profit organization or charity, you will be allowed to take a philanthropic deduction on your taxes. However, you will be required to use the IRS Schedule A form and itemize your personal deductions. The timeshare donation deduction can only be equal to the reasonable market price of the timeshare at the time the donation was made, less the amount of any sort of deductions related to depreciation of the timeshare property.

Guidelines for Timeshare Donation Appraisals

Appraisals are required for donating a timeshare that is worth more than $5,000 according to rules set forth by the IRS, to include:

  • The appraisal for timeshare donation tax deduction can be no older than 60 days at the date the donation was made.
  • Appraisals for insurance purposes are not accepted.
  • Timeshare owners claiming charitable tax deductions must be the one who paid for the appraisal.
  • Appraisals paid for by the charity or non-profit are not acceptable.

The IRS is very specific about who can do the appraisal for timeshare donation tax deductions. The appraiser must be considered “qualified” by the IRS. There are several websites online that will assist you in finding an appraiser who is qualified according to IRS standards.

Websites that help you find an IRS qualified appraiser include:

  • Appraisers Association of America
  • Assessment Institute.
  • American Society of Appraisers.
  • Evaluation Foundation.
  • National Association of Independent Fee Appraisers.
  • Foundation of Real Estate Appraisers.

When Are Appraisals Required for Timeshare Donation Tax Deductions?

You have to provide the charitable organization with a duplicate of the timeshare appraisal before October 15 the year following the exact date of donating a timeshare.

What Documentation is Necessary to Donate a Timeshare to Charity?

When filling out your annual tax forms, you will additionally need to file IRS Form 8238, Noncash Charitable Contributions if your timeshare has a value of more than $5,000. To complete this form, you will require the input of the charitable organization to which your timeshare was donated, the timeshare appraiser and yourself. Your IRS Form 8238 will need to be endorsed in writing by the proper representative of the charitable organization, as well.

What are the Consequences of Filing a False Appraisal Value when Donating a Timeshare?

If you fail to accurately file your tax information, including submission of a falsely inflated appraisal and/or valuation of your timeshare, you could be liable for substantial fines in the thousands of dollars by the IRS. The problem with many timeshare donation companies is they will advise you to claim far more on your taxes than the IRS allows, setting you up for disaster.

Claiming charitable donations in the thousands of dollars is a red flag for IRS agents, and can instantly make you a target for a tax audit. Taking this route as a way to get rid of your timeshare contract is a complicated and treacherous path. A better way to help the charity of your choice is to simply cancel your timeshare contract with the help of a Timeshare Cancellation company, and then donate the money you will be saving each year to your favorite non-profit.