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- How to Deduct Home Mortgage Interest When Filing Separately
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Having a timeshare allows you some time away from home each year to relax and refresh yourself. If you're paying interest on a mortgage on the timeshare, it can also refresh your wallet: the interest on the timeshare mortgage may be tax-deductible, which can increase your tax refund.
To claim your mortgage interest on your time share, you have to count the time share as your second home. According to IRS Publication 936, a second home has to have bathroom, kitchen and sleeping facilities. In addition, you must meet the use requirements. If you don't rent out your timeshare, you don't have to use it to claim it as a second home. If you do rent it, you have to use it for the longer of 10 percent of the time you rent it out, or two weeks.
Special rules apply to timeshares for figuring the time it is rented out and what constitutes personal use, according to IRS Publication 527. First, only the time that you have the timeshare is counted. For example, if you have a two-week timeshare, you aren't treated as "renting" the timeshare for the remaining 50 weeks of the year. Second, days that you exchange for time at other timeshares are still counted as personal use days. For example, if your timeshare is in Florida and you exchange your two weeks under a timeshare arrangement for two weeks in Colorado, those two weeks still count as personal use.
First, you're limited to having just one second home at a time for the purposes of the mortgage interest deduction. For example, if you're already deducting interest on a mortgage for a home that isn't your primary residence, you can't add on the interest from your timeshare. Second, you can't deduct more than interest on $1 million of mortgage debt each year. For example, if you have more than $1 million in mortgage debt on your main home, your timeshare mortgage interest won't help reduce your tax bill.
Your mortgage lender should send you a Form 1098 that documents how much interest you paid on your timeshare mortgage during the year. To claim your timeshare mortgage interest, you need to itemize your tax deductions, using Schedule A. The sum of your itemized deductions replaces your standard deduction, so it only makes sense to claim the mortgage interest on your timeshare if your total itemized deductions exceed your standard deduction.
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