If you bought the time share for personal use, then just as in the case of a sale of a principal residence, no loss is allowed. If you bought the time share for investment purposes, you may be able to take the loss as a long-term capital loss.
For calendar year 2007, taxpayers covered by an HDHP may contribute up to the lesser of the annual deductible or $2,850 ($5,650 for family coverage).