Deduct your timeshare for business
If you use your timeshare for personal and business lodging, you may be able to deduct some of the cost as a business expense.
If you use the timeshare for business and personal purposes during the year, you simply allocate the costs between personal, and business use. As an example, if you used the timeshare one week for business and one week for personal use you would be able to deduct 50 percent of the cost as a business expense.
Don’t rent the timeshare if you want to receive the maximum tax benefits from your timeshare. If you rent your timeshare, it complicates your tax-deduction. Although you can still receive some benefits.
By not renting it you can avoid the vacation-home rules that limit deductions. However, there is an exception if you rent to relatives.
Fortunately, the tax laws allow you to rent the timeshare at fair market rent to a relative. Your relative’s rental of the timeshare counts as personal use by you. Your relative could even write you a check and you could deposit it in the bank without creating any additional tax issues. For this purpose, relatives include your immediate family which would be your parents, brothers and sisters, children and grandparents.
A business that is a sole proprietorship or a single-member LLC can claim the deduction by deducting the cost on the Schedule C.
There is a different method for deducting the timeshare if your business is a corporation. If you own the timeshare personally, the corporation will need to reimburse you for your expenses and depreciation as employee business expenses. Your corporation reimbursement should follow the rules of an accountable-plan in order to keep you from reporting the payment as income.
Timeshares can be purchased as either deeded or non-deeded.
If you bought a deeded timeshare, you would have an ownership interest in the real estate. In this case you would allocate the purchase price to land, land improvements, building and personal property.
The building would be depreciated over 39 years since it is being rented as commercial use of business lodging property. You would write off the interest if it was being financed. Annual maintenance fees would be deducted as lodging expenses.
The other type of purchase is a non-deeded timeshare, where you buy a lease, license or club membership that lets you use the property for a set amount of time each year for an agreed upon number of years.
With the non-deeded property, you would allocate the cost over the number of years of the lease. You would also deduct the annual maintenance fee each year if there was one.
Bringing a business associate along with you to your timeshare is a great way for you to provide a free vacation location for them and a tax write off for you. And of course, it will provide an opportunity to discuss business and develop your relationship.
David Zubler has an accounting degree and computer science degree with high distinction and has experience as an accounting manager and controller in manufacturing, and has owned his tax/consulting business since 1990. David Zubler is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org.