An RV has tax benefits if you know where to find them. Tax deductions are much tougher for most taxpayers to justify now that tax reform has increased the standard deduction, but there are still several tax benefits that come with owning an RV. We spoke to tax experts familiar with the RV industry and found a number of credits and deductions that are still available to RV owners as they file their tax returns this season.
If your RV qualifies as a second home in 2018, interest on your RV's loan will still qualify for the mortgage interest deduction. The IRS spells out which RVs qualify as a second home: “For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”
You have to be very careful when documenting the time spent in your RV as a dwelling and the time you spend using it as a business space. If it's a strictly business venture, it should fall under the IRS' home-office deduction as a dedicated workspace. If it isn't, some particularly unfortunate business owners have discovered that even minimal recreational use sometimes doesn't sit well with the IRS. Consider consulting a tax attorney before proceeding further.
If you have an actual motorhome and not just an RV that you're towing, you may be able to deduct mileage expenses. They're 54.5 cents per mile for 2018 and 58 cents per mile in 2019, but once again, you'll have to make it clear what purpose your travel serves. More than 50 percent of the miles you drive must be used for business to try to take the RV as a deduction.
St. Louis-based Roberg Tax Solutions notes that you can still use your RV for both business and pleasure if you're smart about documenting both. You'll have to provide documentation of the rental income and show that more than 50 percent of the time spent in the RV is for business purposes. However, if you don't live in that RV for more than 30 days at a time during business trips, it will still qualify as a business expense. Just make sure you use it yourself for at least 14 days or more than 10 percent of the days it was rented out, otherwise you risk losing the home mortgage interest deduction. Check with a tax attorney and consult the IRS' rules for renting residential property before proceeding.
Again, if you're using your RV as a business, you can immediately expense the depreciation on it — especially if it's a motorhome — and recoup some of the costs. As Jan Roberg of Roberg Tax Solutions notes, if you aren't entertaining clients and have no other use for the RV besides your business, depreciation should be an easy write-off.
If you bought your RV in Alaska, Delaware, Montana, New Hampshire, or Oregon, you won't be able to deduct the sales tax simply because you didn't pay it — those states don't charge sales tax. Elsewhere, you can deduct sales tax for major purchases like cars, airplanes, boats, and building materials for home improvement. The 2017 tax reform law placed a $10,000 limit on the amount of state and local taxes you can deduct, but that's still a high enough ceiling for the IRS to provide a calculator for folks looking to make that deduction.
Various states, including Georgia and Massachusetts, apply an ad valorem tax or “use tax” to the value of cars, boats, and recreational vehicles. You may pay it up front or when you get your new tags, but it's a state and local tax that's deductible on Schedule A. You'll have to determine whether or not it sneaks under the $10,000 limit, but it's available if you want it.
Honestly, it's going to take a lot of itemization to make these deductions worthwhile. Back in 2017, the standard deduction was $6,350 for single people and $12,700 for married couples filing jointly. After tax reform was implemented for 2018, that standard deduction rose to $12,000 for singles and $24,000 for married couples filing jointly. That's a fairly large deduction that, despite the loss of the $4,000 personal exemption, minimizes the benefits of itemizing RV deductions. However, as several RV experts and tax experts have noted, you shouldn't buy an RV for the deductions anyway. If you can minimize the tax burden of owning an RV, do so, but the number of deductions isn't great enough to make your rolling camp shelter a great tax shelter as well.
