When determining the cost of a timeshare unit, you also must take certain long-term factors into consideration. There are tax ramifications that will be individual to every owner, along with the costs that you will experience if you decide to add to your “timeshare empire” by purchasing additional weeks or points. There is also the long-term inflation factor to keep track of, simply to make sure you are actually saving vacation dollars as compared with the costs you would experience for the same vacations at hotels.

Tax Ramifications

In many cases, you will be able to treat your timeshare similar to the way you treat your primary residence each year during tax time. The information provided below is intended to be a guide — but you must check with a personal financial advisor to determine exactly how timeshare ownership will affect your long-term tax situation.

Generally speaking, the interest you pay on your timeshare loan will be tax deductible — as long as you have purchased a deeded unit and not a right-to-use timeshare. The Internal Revenue Service typically allows for this deduction on one primary residence and one additional residence (which, in this case, would be your deeded timeshare unit). If you own more than one week of deeded timeshare at the same resort, you may be able to count all of those weeks as one additional residence, since they are in the same place, but you and your accountant will have to work through the finer points to be sure.

Further, when it comes time to sell your timeshare, any profit you make will be taxable. Given that most people do not earn a profit when reselling their timeshares, though, it likely will be more important for you to understand the tax ramifications of selling at a loss. In general, if you use your timeshare for personal reasons, your loss will not be tax deductible. If you use your timeshare for business — particularly as a rental property — you may, in some cases, be able to deduct any loss you sustain.

Since taxes and deductions are so personalized nowadays, it is important that you and your accountant discuss your specific situation before you purchase any timeshare unit. The guidelines explained here might be helpful, but they are no substitute for good firsthand knowledge about what you can expect throughout the duration of your timeshare ownership.

Owning Multiple Properties

The biggest long-term financial effect of owning multiple timeshare units is that you will be paying more for the privilege — and you will have to ensure that your payments are, over the long term, still lower than the amount of money you would have paid for hotel-based vacations in the same destinations.

Remember, these costs are not just the costs for the multiple weeks themselves, but also for multiple maintenance payments, special assessments, and the like. In some cases, you may be offered discounts on additional weeks during the time of your original purchase — discounts that can buffer some of the long-term expenses — but again, you need to be sure you are getting real long-term value for your “vacation investment.” Owning multiple properties is a good financial idea only if you actually intend to use them, and if by using them you save money over what you would have otherwise spent on hotels.

Expected Resale Value

A lot of people think that timeshare units are like other vacation properties. The belief goes something like this: “If I don't use it, I can just sell it for a small loss, or maybe even for a profit.” In truth, though, most people who sell their timeshares reap no more than half the original cost that they paid when their timeshare was new. If you buy a unit on the resale market and then try to resell it again, you may see less of a loss (or even a gain), but in general, new timeshare units hold their value about as well as new cars — dropping precipitously the minute you sign the papers.

Inflation… or Not

Perhaps the most important long-term cost factor to consider when buying a timeshare is inflation. Remember: The entire notion of timeshares being a smart financial purchase is that they will, over time, help you save money when compared with having to buy hotel rooms during a lifetime of similar vacations.

If that oft-stated inflationary projection of 5 percent, per year, increases on hotel rooms does not occur — and it has not occurred in recent years — you may be just as financially well off paying for hotel rooms instead of buying a timeshare at all. There are tradeoffs, of course, in terms of room sizes and additional benefits, but when speaking strictly about long-term money management and the impact of a timeshare on your portfolio, inflation is going to be the key.