Have you ever considered your time-share use as a charitable deduction? If you have ever attended a charity auction, it is not uncommon. Often you may see a week’s use of a time-share included in the items donated for auction. The time-share owners who donate these weeks do so in hoping to be able to take charitable donation deduction on their tax returns.
How does time-share use count as a charitable deduction?
How does someone find out how much one can deduct this type of donation? The answer may be a surprise to you. The IRS has a rule(1) that states, the use of a property, or the permission to use and occupy a property, is not considered a gift of property. Also, the Internal Revenue Code does not allow a charitable deduction for a gift of a partial interest in a property unless this is done in trust(2). So the answer to this question is it doesn’t count. No charitable contribution deduction is allowed for the use of a time-share property.
What about expenses that are involved with the the time-share use?
Now that is another story. Time-share owners are generally required to pay an annual maintenance fee that covers the pro rata upkeep of the resort itself. This includes housekeeping services. The question arises: Can the time-share owner deduct the maintenance fee for the week donated?
IRS regulations (3) allow deductions for expenses that arise in connection with personally rendered services to a qualified organization.
However, services provided by others, are not personally provided to the charity are not deductible. This is true even if even if the services were paid for by the taxpayer. What does this mean? Well this includes the services provided by the time-share management company that are paid for with the taxpayer’s maintenance fees, the time-share’s maintenance fees for the donated period. None of those examples are deductible. However, if the taxpayer incurred other expenses in connection with the donated use of the time-share, a deduction for those expenses would be allowed under IRS regulations (3). Examples of these may include: such as driving to the time-share property to let the winning bidder into the unit. Why you ask? This is because the time-share owner would be performing the service directly for the charitable organization. So something like a mileage deduction at the rate of 14 cents per mile would be allowed.
So what’s the bottom line?
The donation of the time-share use does not make up a charitable contribution. If you have questions related to charitable contributions please give Alex Franch, BS EA a call at 781.849.7200. Alex is an enrolled agent with the IRS. Alex can talk with you about the ins and outs of charitable contributions and how you can maximize your deductions.
Other Articles Regarding Charitable Donations:
- Charitable Contribution: Tax Plan for Potential IRA-to-Charity Provision
- Don’t Expect the IRS to Take Your Word on Charitable Deductions – Substantiate
- Getting Married? See What Can Be Tax Deductible
(1) Rev Rul 70-477, I.R.B. 1970-3
(2) IRC Sec 170(f)(3)(A)
(3) IRS Reg 1.170A-1(g).