Using Your RV as a Tax Deduction
Can I use my RV as a Tax Deduction?
Tax season. Don’t we all dread that time of the year. I know I do. But fortunately, I’ve come across a way to use my RV as a tax deduction and you may be able to use yours, too.
There are a few tax breaks that you can take advantage of that will save you and put extra cash in your pocket to take an extra trip that’s on your bucket list.
Remember, different state laws vary so we’re focusing on federal RV tax benefits. When filing, don’t forget to investigate your state’s laws to see if there’s any relevant deductions as an RV owner.
It doesn’t matter if your RV, travel trailer, motor home or Happier Camper is new or used when filing your yearly taxes with the IRS.
What kind of deductions are available?
There are tax write-offs for both new and used RVs. Some are only good for a one-time tax year, such as:
Sales tax paid on purchase of RV
State or municipal property taxes
Interest paid on a loan or mortgage for an RV
Business tax deductions – as a home office or travel that’s work-related or if you use it for rental income
If you plan on using your RV as a deduction, receipts are an absolute must plus there are additional form that are needed to get those tax benefits. Take the time to evaluate whether your itemized deductions exceed the IRS standard deduction. That extra step is key to possibly saving you some money. If you’re in doubt, speak to a tax professional to make sure you’ve taken all the relevant deductions for your RV.
Let’s elaborate on the various deductions
You’ve bought your new or used RV and paid a sales tax for your state. This gives you a one-time chance to claim that you’ve paid cash or gotten a loan for that purchase. The sales tax can be quite significant and may help you with your itemized deductions over the amount of the standard deductions. However, if your state doesn’t have a sales tax, you can’t use this in figuring your taxes. Be sure to keep your sales slip that shows just how much you paid in sales tax.
Local and State Tax Deductions
If your resident state or municipality charges a property tax on vehicles, then you may be eligible for a percentage of the total value of the vehicle. This tax percentage is different from state-to-state but there may be a $10,000 maximum for combining state property taxes and sales tax for your recreational vehicle.
Loan or Mortgage Loan Deductions
If you’ve acquired a loan or mortgage loan for your RV, you may be able to take advantage of interest deductions paid for both full-time or part-time living in your recreation vehicle, motorhome or travel trailer.
IRS Publication 936 states, “A home includes a house, condominium, cooperative, mobile home, house trailer, boat or similar property that has sleeping, cooking and toilet facilities.”
This basically says your RV could possibly qualify as your main or second home and the annual interest paid on the loan can be deducted as long as it has a bed, bathroom and kitchen.
If you want to claim this deduction, you need to use a secured loan or mortgage to finance your RV. A secured loan means that the RV is collateral and if you default on payments, the bank can take your RV. However, if you paid cash, credit card or personal loan for your recreational vehicle, you cannot claim this deduction.
A few things to think about:
You can still use this deduction even if you change the RV from your main to secondary home.
You can claim the interest deduction even if you have your RV in storage all year.
Interest on loans for towing vehicles or being towed by, then your RV can’t use this deduction.
If you decide to sell your RV and you’ve been claiming it as your main, full-time home, you’re still eligible for the interest deduction up to but not including the sale date.
As in many things, there are exceptions for homebuilt or unique RVs, so you may want to discuss options with a tax professional. Don’t make the mistake of assuming that your RV fits the criteria. Assuming often gets us into trouble.
It’s a good idea to read and thoroughly understand IRS Form 1098. Your lender may or may not give you this form and it will name how and where you can claim this deduction on your IRS tax form.
Business Tax Deductions
Do you rent out your RV when you’re not traveling or use it for business purposes? If you are, you may be able to write off some of the expenses associated with your business such as gas, home office, electric or rent. What you can write off will depend on how you use your RV – solely for business, a combo of full-time living and work or perhaps a mix of business and personal use.
Before we dig a little deeper into the general outlines of the above scenarios, we strongly encourage you to discuss your situation with your tax professional to find what qualifies as a recreational vehicle tax deduction for your circumstances.
Solely for Business
If you use your RV only for business and nothing else, then you will possibly be able to use most of or the entire RV plus operating and maintenance as business expense deductions.
The downside is that the RV is off limits for personal use. Even if you use it a few times for a family vacation can disqualify that business deduction. So, think twice before deciding to use it for that get-away trip.
Living Full-time and Work
Many are living in their RVs full-time plus working at jobs that allow them to travel getting the best of both worlds. This may open certain business-related expense deductions, depending on if they’re used for business.
Mixed Personal and Business Use
If you decided to make a few extra dollars by renting out your RV when you’re not using it allows you to write off expenses related to that income-producing venture. This applies to having your RV parked on your property as an ADU (rental accessory dwelling unit) or you use a service such as Good Sam RV Rentals to advertise for renters. Many find that renting is an easy way to recoup any initial investments quickly plus you may be able to claim certain deductions like depreciation of assets, advertising, rental insurance, maintenance and any commissions you have to pay out for rental management services.
It is absolutely important to keep meticulous records so that your RV will qualify for any and all business-related deductions. You need to know how many days your RV was rented out and how many days was personal. Again, consulting a tax professional for figuring out what can be claimed as business in conjunction with a home mortgage deduction. The rule of thumb here is that your RV must be used as a home for a minimum of 14 days or more than 10% of the sum of the days it was rented. The greater of these two numbers decide what’s your qualifying home mortgage deduction.
Concluding the Recreational Vehicle Tax Benefits
Most importantly, never assume when doing your taxes. It’s to your advantage to work with either a certified public accountant or a tax professional who understand federal, local and state laws. New laws are being made every year and they often have a huge impact on whether or not certain deductions qualify as business or other deductible expenses and that is why we strongly recommend contacting someone who knows the laws and will keep you safe financially.
Note: This is not official tax advice. For that, contact a professional who know what tax laws have changed and will make sure your deductions are valid. Double and triple check your deductions before you file with the IRS or state.