Taxable investment income turned into nontaxable expense reduction
This just hit me this morning. I hate timeshares, they are horrible, stupid, and make little economic sense. However....the tax aspects are intriguing and potentially outweigh some of the many negatives, particularly for high tax rate people such as myself. Simple example.....spend $50,000 for a timeshare which, by utilizing the timeshare for vacation travel that you would otherwise pay, say, $2,000 for each year (let's say, including the impact of annual fees you have to pay). That's a yield of 4%. Not really that exciting, basically something like a long bond yields but with higher risk. However, when you consider the tax aspects...the $2,000 saved is "earnings" that aren't taxed...it's really like earning 7.3% if you are, say, in a 45% marginal tax bracket. I understand that it would have to provide vacation value you would otherwise pay for...and you'd have to consider all the costs such as annual fees...and that with a timeshare you are limited to certain areas/timeframes making it not necessarily equivalent to just being able to pay for a vacation when and where you exactly want (which is why I've never bought a timeshare)...but the tax avoidance opportunity is interesting. Anyone else have further thoughts on this? What other opportunities should we be looking at that provide "income" as a form of expense reductions that are not taxable? ((using cash to buy the house you live in rather than investing otherwise and paying rent is an obvious example).).