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Yup, there are a few little pitfalls in donating anything, including timeshares. I know you want to get rid of the lifetime, ongoing, ever growing bills, and you can’t give it away, let alone sell it for any kind of decent money. In fact, there are some very friendly companies around that will give you a nice offer like, you pay them almost $4,000 and they’ll take the timeshare off you hands. Think of all the money you’ll save in the next 20 years by being free of those annual owners fees!
Now you’ve begun to hear about donating your timeshare and getting some tax write off. That sounds better than paying someone to take it off your hands. Wait, you’ve tried that, too, and they’ve told you they won’t take your timeshare? It’s one of those black listed properties? They can’t resell it for money themselves? What’s going on here? How do you get out of this predicament? Here’s a sample of a black listing of properties. Please understand they organization is legitimate and good, they are not trying to be hard nosed, but they know from experience these properties just don’t sell.
The answer is more than this article can cover but I’m going to tell you a few things the IRS wants you to know BEFORE you donate your timeshare. Understand that all this is there in the IRS manuals, regulations, forms and instructions and available to you if you only knew what to look for and how these seem to be hidden cross references they don’t tell you.
First, why won’t the nonprofit organization (NPO) take you donation? Because they don’t want to be in the same position you’re in. It’s that simple. They know that if they take your timeshare, they will be hit will all those ownership fees and end up going broke trying to pay them. So this is what they do. They make sure your timeshare is one they KNOW will sell from the experience of their trusted broker. Next, they make sure it is all paid for including all current fees so there is no unexpected costs in the sale. Then they make sure you continue to hold title and be responsible for all the fees and expenses until they actually sell it. THEN they take title from you, hold it a few moments (usually less than 6 moments in all) and then sign it over to the actual buyer that wants it. That’s called a double closing and is perfectly legal. Finally, they give (or they should anyway) you the proper IRS form that states they received the timeshare from you as a donation and you can now deduct its value from your income as a donation.
But what can you deduct? Here’s the beginning of these dirty little IRS secrets. I’ll list them for you.
1. If the property is transferred within 36 months of the original acceptance date of the property, the value used for the donation credit is defined as the actual money received by the NPO. That means your $20,000 timeshare, which they sold to $1,500 gets you $1,500 in credit. If you’re in a 20% tax bracket, that’s worth about $300 in cash back to you at tax time. Yah, that’s right, anytime in 36 months. On top of that, they have to notify the IRS of the true value they received. You can claim anything you want but when the IRS cross checks they’ll want that $3,700 over refund back with interest. Did I tell you anytime in 36 months? That’s right.
2. If you claim the deduction as more than $500 you have to use a special Form 8283 Noncash Charitable Contributions. If you claim more than $5,000 you must have a licensed appraiser do a licensed and sworn to appraisal AND sign the Form 8283, too. Now, if the NPO got $6,000 cash for it and can show you the cash receipt, you don’t need the appraisal, but that’s what you get to claim.
3. If the timeshare is NOT sold very quickly (think by the end of the year) you can try to claim a different way to evaluate the property but remember the 36 month window. If a sale price can not be used, the IRS says there are three ways to determine value. A.) What are similar properties selling for on the open market; B.) what is the income generation value if it is a commercial property that is rented MORE than 7 days a year; or C.) what would it cost to replace the timeshare? Only A.) and C.) apply. Guess who sells the majority of timeshares on the open market? The resort. In addition, they generally list the sale price on the title documents, especially if it’s being financed. Whereas, people like you and me usually don’t want to admit receiving any money for it. Here’s the problem. If the appraiser sets out to claim that you can’t sell it the same way or for the same price the resort can, he’s doing you a disservice and not doing his job right. There is no IRS policy, statement or regulation denoting differences in sales. They are all considered the same and each one has to be evaluated in it’s merits. Of course, if you can do the basic research yourself on a good number of those sales and present that information to the appraiser you might have a better chance to convince him to use the resort sales numbers. Next, you would have to give him some idea or how you could have sold it for close to the resort price if you’d wanted to (Don’t tell him list it on the Internet. He knows better.)
So, now that you know a few of the dirty little secrets, what do you do? If you can’t sell it or have decided you do want to donate it, make sure you understand the above. Next, don’t try to cheat the IRS. Big Brother is watching. When you do contact someone to donate to, find out what their plans are for dealing with your timeshare, how long they are going to hold it, how they will dispose of it, what documentation they will give you concerning the value of your donation and keep in mind the points above. Keep in mind that a NPO must cover their expenses and will probably charge you a fee if they are not going to sell and get the cash out of your timeshare. Consider what you would have to deposit to cover at least 3 years of ownership fees to delay any sale until after the 36 months if they are going to hold it that long. After all, they get nothing out of it until they do sell and you don’t want that done while you’re trying to maximize your deduction credit.
If you’d like to know a little more about this, you can contact me or visit our NPO website. Our advice is always free and we are willing to give it to you as long as you’re nice to us.
Dr. Ken Rich
Now you’ve begun to hear about donating your timeshare and getting some tax write off. That sounds better than paying someone to take it off your hands. Wait, you’ve tried that, too, and they’ve told you they won’t take your timeshare? It’s one of those black listed properties? They can’t resell it for money themselves? What’s going on here? How do you get out of this predicament? Here’s a sample of a black listing of properties. Please understand they organization is legitimate and good, they are not trying to be hard nosed, but they know from experience these properties just don’t sell.
The answer is more than this article can cover but I’m going to tell you a few things the IRS wants you to know BEFORE you donate your timeshare. Understand that all this is there in the IRS manuals, regulations, forms and instructions and available to you if you only knew what to look for and how these seem to be hidden cross references they don’t tell you.
First, why won’t the nonprofit organization (NPO) take you donation? Because they don’t want to be in the same position you’re in. It’s that simple. They know that if they take your timeshare, they will be hit will all those ownership fees and end up going broke trying to pay them. So this is what they do. They make sure your timeshare is one they KNOW will sell from the experience of their trusted broker. Next, they make sure it is all paid for including all current fees so there is no unexpected costs in the sale. Then they make sure you continue to hold title and be responsible for all the fees and expenses until they actually sell it. THEN they take title from you, hold it a few moments (usually less than 6 moments in all) and then sign it over to the actual buyer that wants it. That’s called a double closing and is perfectly legal. Finally, they give (or they should anyway) you the proper IRS form that states they received the timeshare from you as a donation and you can now deduct its value from your income as a donation.
But what can you deduct? Here’s the beginning of these dirty little IRS secrets. I’ll list them for you.
1. If the property is transferred within 36 months of the original acceptance date of the property, the value used for the donation credit is defined as the actual money received by the NPO. That means your $20,000 timeshare, which they sold to $1,500 gets you $1,500 in credit. If you’re in a 20% tax bracket, that’s worth about $300 in cash back to you at tax time. Yah, that’s right, anytime in 36 months. On top of that, they have to notify the IRS of the true value they received. You can claim anything you want but when the IRS cross checks they’ll want that $3,700 over refund back with interest. Did I tell you anytime in 36 months? That’s right.
2. If you claim the deduction as more than $500 you have to use a special Form 8283 Noncash Charitable Contributions. If you claim more than $5,000 you must have a licensed appraiser do a licensed and sworn to appraisal AND sign the Form 8283, too. Now, if the NPO got $6,000 cash for it and can show you the cash receipt, you don’t need the appraisal, but that’s what you get to claim.
3. If the timeshare is NOT sold very quickly (think by the end of the year) you can try to claim a different way to evaluate the property but remember the 36 month window. If a sale price can not be used, the IRS says there are three ways to determine value. A.) What are similar properties selling for on the open market; B.) what is the income generation value if it is a commercial property that is rented MORE than 7 days a year; or C.) what would it cost to replace the timeshare? Only A.) and C.) apply. Guess who sells the majority of timeshares on the open market? The resort. In addition, they generally list the sale price on the title documents, especially if it’s being financed. Whereas, people like you and me usually don’t want to admit receiving any money for it. Here’s the problem. If the appraiser sets out to claim that you can’t sell it the same way or for the same price the resort can, he’s doing you a disservice and not doing his job right. There is no IRS policy, statement or regulation denoting differences in sales. They are all considered the same and each one has to be evaluated in it’s merits. Of course, if you can do the basic research yourself on a good number of those sales and present that information to the appraiser you might have a better chance to convince him to use the resort sales numbers. Next, you would have to give him some idea or how you could have sold it for close to the resort price if you’d wanted to (Don’t tell him list it on the Internet. He knows better.)
So, now that you know a few of the dirty little secrets, what do you do? If you can’t sell it or have decided you do want to donate it, make sure you understand the above. Next, don’t try to cheat the IRS. Big Brother is watching. When you do contact someone to donate to, find out what their plans are for dealing with your timeshare, how long they are going to hold it, how they will dispose of it, what documentation they will give you concerning the value of your donation and keep in mind the points above. Keep in mind that a NPO must cover their expenses and will probably charge you a fee if they are not going to sell and get the cash out of your timeshare. Consider what you would have to deposit to cover at least 3 years of ownership fees to delay any sale until after the 36 months if they are going to hold it that long. After all, they get nothing out of it until they do sell and you don’t want that done while you’re trying to maximize your deduction credit.
If you’d like to know a little more about this, you can contact me or visit our NPO website. Our advice is always free and we are willing to give it to you as long as you’re nice to us.
Dr. Ken Rich
I think I'll take my chances listing it hear or OY and keep my $500 in my pocket. Oh wait, I collect timeshares rather than get rid of them.....nevermind.
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