As an RV owner, it’s not always fun and games. We all know how repairs and maintenance can take some of the lusters off our purchase of an RV. After all, when you put a house on wheels, it’s bound to require some assistance now and then. But ownership can come with some great tax benefits as well.
Just to clarify: I am not a tax professional but I have done plenty of research. As a result, I’ve been able to assemble several RV tax benefits that make purchasing one a pretty enticing idea. If after reading the following you have any specific questions, be sure to reach out to a qualified tax professional. They can provide guidance and clarity for more information on your specific needs.
Mortgage Interest
Interest deductions on individual mortgages or loans can be useful. Here are a few things to think about:
You May Be Able to Count Your RV as Your Second Home
If your RV is a vehicle you use for getaway camping and could be considered your “vacation home”. Good news! You may be able to deduct the interest on certain loans because your recreational vehicle is a second home.
If Full-Timing, Your RV Can Be Your First Home
Additionally, let’s say you’re living in an RV full-time and do not own a home. Then, it is considered your first residence, and the interest on many RV loans would be deductible. This may be a double-edged sword, however. Many financial institutions do not make loans on recreational vehicles that are declared as full-time residences. Usually, the reasoning is because the vehicles aren’t always constructed for full-time use. Be sure to check with your lending institution, as well as tax consultant, regarding what types of loans would be allowable under this ruling.
The Term “Home”
The Internal Revenue Service (IRS) defines a home broadly, allowing the term to encompass RVs. Still, to qualify as property, an RV must have all three of the following: sleeping, cooking, and toilet facilities.
Sales Tax Deduction
Although the rules have changed, state and local sales taxes paid on an RV may be deducted up to $10,000. This is if you do not choose to deduct state and local income taxes on your tax form.
So you have a quandary when you purchase an RV. One, do you save money on the front end by purchasing and licensing an RV in a state that has lower (or no) sales tax? Or two, do you buy and license it where the tax total is of little concern to you, knowing that you will be deducting the sales tax on your income tax return?
Registration Fees Deduction
If your vehicle is licensed in a state where all or a portion of the fee is based on your RV’s estimated value, that portion can usually be deducted from your income tax return. Each state calculates its licensing fees differently. Some may charge you based on your vehicle’s weight, or they may base the price on a variety of criteria, including a flat fee for tags, plus other taxes and charges. If any of the entire fee is based on estimated value, only that portion can be deducted as RV tax benefits.
Solar Credit
If you add a solar setup to your coach or trailer, you can deduct a portion of the cost on your income tax form. For 2021, that percentage is 22%, and in 2022 the rate goes down to 10%. You must own the solar system, as this RV tax benefit does not extend to rentals. So if you are planning a solar upgrade and what to save a bit of the cost to do so, get it done soon!
One of the biggest questions many tax professionals get from full-time RVers has to do with mileage deductions. Here’s the straightforward explanation of what is and what is not deductible:
If you live in your RV full-time, you cannot deduct the mileage of moving your RV from campsite to campsite.
You have a tow vehicle or toad that you use to get to a specific job, client, or to run business errands, then those particular miles may count.
Or if you use your RV for business, some of the mileage may be deductible, but the IRS requires a detailed accounting of those miles’ origination and destination.
Due to mileage varying with each set up, we suggest that you check on specifics for your scenario with a tax professional. One that has experience with the unique qualifications of full-time RVers would be best suited to answer your questions knowledgeably.
There are numerous RV tax benefits to be utilized if you plan ahead. However, many require detailed bookkeeping. So, if you have invested a lot in your dream rig, these benefits may be worth the extra effort. It’s always worth trying to put some of those dollars back in your pocket!
If you ever take your RV on work trips, you may be able to deduct some of your RV expenses from your taxable income. You may be able to deduct expenses like campsite fees and other travel costs, as well as business miles travelled, if this is the case.
The benefit of treating a boat or RV as your primary residence, is to take allowable homeowner tax deductions that can decrease your overall tax bill. As long as the boat or RV is security for the loan used to buy it, you can deduct mortgage interest paid on that loan.
An RV or motorhome qualifies as a second home if it contains a kitchen, toilet and sleeping area. Available deductions include any interest on an RV loan and property taxes.
If you took out a loan on your RV, you may be able to deduct the interest on it. To do this, your RV will need to qualify as either a primary or secondary home. Then, your RV loan is treated as effectively the mortgage on your home. This qualifies you to deduct the interest that accrues on your RV loan.
Other costs associated with a second home are considered personal and not deductible. The storage fees would never be tax deductible. Similarly, marina fees for a boat or association fees for a condominium would not be deductible. A second home is a property that you do not primarily rent out.
What States Have No Sales Tax on RVs. There are currently five states that have no sales tax at all. These are Alaska, Delaware, Montana, New Hampshire, and Oregon. The states with the lowest combined state and local sales tax rates are Hawaii, Wyoming, Wisconsin, and Maine.
If you use part of your motorhome as a home office, you may be eligible for a home office deduction. This deduction allows you to deduct a portion of your RV expenses. These expenses can be depreciation, utilities, and maintenance, based on the square footage of your dedicated home office space.
You need to have permanent sleeping, eating, and bathroom facilities in place to claim your RV as a legitimate second home deduction. Unless you took all of those features out of your RV when you bought it, you're fine.
In addition to being where you spend most of your time and where you keep your things, to claim your RV as your primary residence, it must be able to be used as a home. In other words, it needs the basics: A place to sleep, a kitchen and appliances for cooking, a bathroom with a toilet and shower, and so on.
Therefore, based on your facts and representations, the RV's having actual unloaded weights of less than 13,000 pounds are 3-year property as defined by section 168(c)(2)(A) of the Code, and the RV's having actual unloaded weights of 13,000 pounds or more are 5-year property as defined by section 168(c)(2)(B).
RV rentals only qualify for Section 179 deductions if used more than 50% for business. If you don't have more than 50% business use, you can still depreciate the RV based on the percentage of business use. This is if you report the activity on Schedule C and have active participation.
Is an RV considered a mortgage? No. An RV loan is a type of installment loan. While similar to a fixed rate mortgage in that there are fixed monthly payments for the life of the loan, it is not considered a mortgage.
If you use your RV solely for business purposes, you will be able to write off most, if not all, of the expenses related to operating and maintaining the RV for that business. In fact, the whole RV may qualify as a business deduction. The kicker here is that you won't be able to use your RV for personal use.
Section 179 of the Internal Revenue Code (IRC) allows business owners to deduct the cost of qualifying business equipment, including certain motorhomes and RVs, in the year the property is placed in service. This deduction can be particularly valuable for small business owners who use RVs for business purposes.
A quick overview of how RVs depreciate by type; class A RVs have an average depreciation of 36% after 5 years, class B (trailers and fifth wheels) RVs have an average depreciation of 37% after 5 years, while class c RVs have an average depreciation of 38% after 5 years.
Like all vehicles, RVs depreciate over time. You can determine an RVs depreciation by the vehicle's age, mileage, wear and tear, and the type of RV you own. Class A and Class B vehicles depreciate similarly, while Class C RVs depreciate more slowly and hold value slightly better.
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