Forget tax break when you donate vacation home stays to charities
by Feb 10th 2010 8:00AM
Vacation home ownership used to represent a higher standard of wealth: It meant you could afford not one, but two mortgages, two tax bills, two sets of utility bills etc. In the current economy, a vacation home very often represents just one thing: A financial burden you can no longer handle.The second home market has been hit hard, if not harder than the primary home market, so most people's efforts to unload the ski condo or lakefront house have been strained. The second best choice for many who are unable to sell that adorable little cabin in the woods has been to rent it out to vacationers. But growing in popularity is the idea of donating a vacation stay in your second home to charity. To that end, schools, houses of worship, and even the local animal rescue group all gladly will accept vacation stays as items they can raffle off.
But here's the rub: It may not be the tax deduction you think it is.
In general, donating a stay at your vacation home cannot be used for a tax deduction or write-off says Christine Karpinski, author of How to Rent by Owner. The donated time might also be counted as personal use time by the owner. If you file your vacation home as income property, you cannot personally use it for more than 14 days a year and you run the risk of this charitable contribution pushing you over the IRS' allotted number of days.
Karpinski advises speaking with your accountant to prevent any negative tax implications before you make a donation. She notes that donating a stay as a charitable contribution may make you feel warm and fuzzy, but it will likely require the same amount of time and effort as a regular booking and in this case, you won't be making any money. You also give up the right to screen your guests since the tenant will be whoever bids the highest in the charity's auction.
And it also might not be such a great tax deal if you are that high bidder. By law, bidders can take a charitable deduction only for the amount they pay that exceeds an item's fair market value. So if your winning bid was $100 to spend a weekend in a cabin that rents out for $200 a night, you haven't been charitable in the eyes of the IRS.
Should you still want to dabble in donating the old homestead, places like Vacation Homes for Charity exist to make the match with charities. Therese Lewis, sales operations manager, says the company collects only a cleaning fee that is passed on to the owner. The company does run a vacation rental business though, and you may hear a sales pitch for that.
