Tax Issues When Donating a Timeshare to Charity
Time-shares are vacation homes that multiple people own together and share the use of. When you purchase a timeshare in the U.S., you will typically have legal title to the property, with your name, and the names of the other owners of the timeshare unit, on the deed.
You are legally entitled to get rid of your timeshare interests at any time, as would be the case with other real estate. Unfortunately, there is a limited resale market for timeshares, and when timeshares are sold, many are sold at a loss because they were initially purchased at an inflated price. (See the Nolo article How to Deduct a Loss on a Timeshare Sale for more on the subject.)
It s often impossible for timeshare owners to sell their interests at any price. As a result, many timeshare owners seek to give their interests to charity. However, many charities refuse to accept gifts of timeshares because of the annual costs involved in owning a timeshare.
Tax Deductibility of Timeshare Donation
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 deductions taken on the property (usually applicable only where the timeshare was rented out).
Rules for Appraising Timeshare to be Donated to Charity
If your timeshare is worth more than $5,000, you’ll have to get it appraised, following IRS rules, which include the following:
- You can’t use an old appraisal–it must be no more than 60 days old at the time the gift is made.
- Insurance appraisals are not acceptable.
- You, the donor, (not the charity) have to pay for the appraisal yourself.
Not just anyone can conduct an IRS-approved appraisal. To satisfy the IRS, the appraisal must be done by a qualified appraiser. There are many professional appraiser organizations whose websites you can use to help find a qualified appraiser. These include:
For more on on criteria for qualified appraisals, see the Nolo article When Are Appraisals Required for Donations?
You must give the charity a copy of the appraisal by the due date (including extensions) of the return on which you claim the deduction usually not later than October 15 of the year after the donation was made.
Paperwork Involved With Donating a Timeshare to Charity
When you do your taxes for the year, you ll also have to file IRS Form 8238, Noncash Charitable Contributions, with your tax return for timeshares valued at over $5,000. This form requires input from the charity, the appraiser, and you. It must include a summary of the appraisal results and the appraiser must sign the form, declaring that he or she is a qualified appraiser. The form must also be signed by the charity.
In addition, you must obtain a written acknowledgement from the charity containing:
- the name of the charity
- the date and location of the contribution
- a reasonably detailed description of the property contributed, and
- a statement that no goods or services were provided in exchange for the contribution (if that was the case).
You are also supposed to keep the following information about your donation in your tax records:
- how you obtained the property, for example, by purchase, gift, bequest, inheritance, or exchange
- the approximate date the you got the timeshare, and
- the cost or other basis of the timeshare.