Can you take depreciation expense on a Timeshare if rented?

[dglemieux]

I've have a timeshare for several years.   I rented it for the first time this year (5 out of a possible 7 days). 

Q: If I did not use it for personal use in 2017, can I deduct depreciation costs against the 2017 rental income?

[DS30]

Yes but if you do not need to report this rent income (because it was rented out for less than 14 days), then you would not be able to claim any depreciation expense.

Depreciation can be calculated using two different ways. Firstly, if you have bought the timeshare unit recently and only used for personal purpose and for family and friends then you can take 3.485% of the cost for which you bought the timeshare as the depreciation cost. Secondly, if you have used the timeshare for renting purposes, then you need to calculate the current resale value and then take the difference between cost of purchase and the resale value as depreciation and more often than not that equals to the rent.

Now that you have calculated the depreciation value, you can deduct that from the rental income for the year to calculate the annual income. If you have made a profit, then the profit is taxable, but if you have made a loss then in most cases it is non tax deductible. The loss is tax deductible in certain cases. In simple words, if you have rented your property for more than 15 days a year and not used it for more than 7 days then you can claim tax deductions for your depreciation loss. Another way to claim tax deduction is to carry forward your loss to the next year till the time you sell your property and during selling, you can claim the depreciation loss specific tax deduction.

[dglemieux]

I believe that I do need to report the rent as income.   I've read that the rule would treat my timeshare as a vacation home only if I personally use it for at least 15 days during the year in addition to the days it is rented.

If I do not meet both 15-day rules, the income is taxable. This means that I must own a timeshare a minimum of three weeks at a single resort, with at least 15 days used personally.  

My timeshare is for 7 days, therefore, I fail the rule and must report the income.

I believe that this will be reported in TurboTax as Rental Income on Schedule E. Deductions allowed include annual maintenance fee, advertising, rental commission, depreciation, property taxes (if you pay them separately from the maintenance fees) and interest on the timeshare.

Concerning the depreciation calculation, Turbotax calculates the amount a bit differently depending upon which way I enter the info.   If I enter through the "Property Profile" I get one depreciation value based on the purchase date.   If I review and update the "Assets/ Depreciation" section, I get a lower depreciation number when I enter the "rental start date" (which is different from the purchase date).   My thought is to go with the lower depreciation amount.   Seems correct and is conservative.

[denise3]

For depreciation purposes, is a timeshare considered residential rental (27.5 yr) property or is it non-residential (39 yr) property?