Monday, December 12, 2005
While the holidays traditionally call for gift giving, some US taxpayers may wish to consider giving an especially nice present this year.
Maybe you’ve thought about renting or even selling your current timeshare property. But have you ever considered giving it away?
That’s right—GIVE your timeshare to an appropriate worthy cause and you can claim a portion (and typically all) of its fair market value as a charitable deduction on your personal income tax return. Do it by December 31, and you may even manage to claim it on the 2005 tax year.
Before you begin rejoicing over this unexpected avenue for tax relief however, be aware that this process is not quite as easy as deducting the checks you drop in the church offering plate on Sunday morning or the resale value of that box of sweaters you gave to the local homeless shelter.
For starters, not all charity programs qualify equally in the eyes of Uncle Sam. Giving your timeshare to a tax-exempt group is not necessarily enough to create a tax break for you. “Tax exempt” merely means that the organization meets the criteria for not paying federal income taxes themselves. Whether or not there is any tax break for the donor is another matter.
The Internal Revenue Service (IRS) recognizes more than twenty different categories of tax exempt organizations, but only a few of these categories qualify such that donations to them are tax deductible. To help you determine the status (and the general credibility) of any group to which you might consider donating your timeshare, contact the Better Business Bureau’s Wise Giving Alliance. You should also get in touch with your state’s charity regulatory agency, which usually is the state’s Office of the Attorney General or the Office of the Secretary of State. http://www.nasconet.org/agencies is a good place to go to find out more about charities in your state.
Some charities simply do not accept timeshares as a donation. Others will only accept timeshares that meet specified criteria. Contact any charity to which you are considering making a donation and ask them if they are interested in your timeshare and if they have experience handling this type of donation.
Depending upon the value of your timeshare property, you may have to obtain a written appraisal in order to claim a tax deduction. At the very least, you will probably need to provide research establishing the price that comparable properties are bringing on the resale market. Additionally, how the charity uses your donation will affect how much and sometimes when you can actually claim the deduction.
Despite all the hoops to jump through, money you do not pay in taxes is still cash conserved. Better yet, it is tax-free cash conserved, and it may be just the funds you need to get you out of your old timeshare property and into a newer, more desirable one.
The IRS has two publications that will be extremely helpful in determining if donating your timeshare resort property is a good plan for you. Check your local library for Publications 526 and 78 or click on the links below to download these resources directly from the website of the Internal Revenue Service.
Lastly, always consult a qualified tax advisor and/or financial planner to discuss the financial implications and tax legalities before making a tax decision of this nature.