How to Maximize RV Tax Deductions
It’s tax season and that means Americans are dreading paying Uncle Sam. And we are looking for every little (and big) deduction that can help us save. So, how many RV tax deductions are there available?
And does it matter what kind of RV you have? Do you need an engine like a Class A or Class C or do Fifth Wheels and Travel Trailers to claim your RV on your taxes?
First, let’s get a little legal stuff out of the way: RV Tailgate Life does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
OK, now that the lawyer people are happy… let’s talk all about RV tax deductions.
RV as a Home Mortgage Interest Deduction
If you financed your RV, you might be able to take the interest on your RV loan as mortgage interest deduction.
Let’s take a look at the rules, limitations, and other things you need to know to be able to claim your RV on your taxes as home mortgage interest.
Does the RV Qualify for Home Mortgage Interest Deduction?
The basic rules for RVs as a second home (or first home, for that matter) have not changed in recent years. Your RV (motorhome, travel trailer, fifth wheel, or van) needs to be a qualified home and have a secured debt under the limitations.
There are also some limitations on whether you can use your interest on your RV loan as a home mortgage interest deduction if you rented out your RV during the year. But more on that in a second.
First and foremost, the question will be whether your RV is a qualified home. Generally, this means that you need sleeping, cooking, and toilet facilities. Class A, B, C, Fifth Wheels and travel trailers should all qualify under these guidelines.
However, many vans may not qualify – in particular the toilet facilities may be missing. If you believe that your van qualifies, you should probably clearly document that you have each of these facilities by showing purchase records for the equipment and taking extensive photos each year.
You can take a home mortgage interest deduction on your main home and a second home.
If you have a fifth wheel or travel trailer, the interest on your tow vehicle will not be deductible as home mortgage interest. Neither will any towed vehicle for a Class A or Class C motorhome. But the interest on the camper/travel trailer/motorhome/RV itself remains deductible.
See Also: Plugging Your RV Into Home Electric
In order to qualify, the mortgage must be a secured debt. This means that the RV must “secure” the debt – if you fail to pay the loan, then the bank could repossess your RV to satisfy the outstanding amount on the loan.
If you financed through a major bank, your RV loan is probably secured debt. However, if you used a personal loan to obtain the money to buy the RV, it would not be a secured loan. In many (most?) states, you can tell an RV is security for a secured loan based on the Certificate of Title from the local tag agent. If the RV title has lien or security interest noted on it, then it would be a secured loan.
For more information on the home mortgage interest deduction, see the IRS’s Publication 936: Home Mortgage Interest Deduction
Other Limitations for RV Mortgage Interest Deductions
For your main home and your second home combined, you can only take the deduction on the first $750,000 of indebtedness. This does not mean $750,000 in interest, but rather $750,000 in principal.
If you exceed this limitation, you may have to reduce the interest you can deduct. At this level, please make sure to consult a tax professional because you probably have a lot more going on than just RV deductions.
In 2017 and prior, the limitation for the principal indebtedness for both the first and second homes combined was $1 million. It sure had a better ring to it, the million dollar limit, than the three-quarters of a million dollar limit. Oh well, Congress obviously didn’t seek my input on this change.
Rental Use of RV
Did you know that you can take interest deduction on a second home even if you never used it during the year? So even if you just left it in storage the entire year and never spent one night in it, you can still use the interest deduction on your taxes.
However, if you rent your RV out to others, then you must use it as a home at least 14 days or more than 10% of the days it was rented out, whichever is more. Otherwise, you’ll lose the home mortgage interest deduction. But you might gain it back under rental or business property.
If you rent your RV out, you need to keep careful track of the number of nights you use the RV personally and the number of nights you rent it out. Keep a calendar or log to show the tax man if they ever come to audit your taxes.
See Also: Go RV Tailgating with RVShare
Can You Use the Deduction?
Even if you have qualified interest on your RV, you may not be able to or want to use the interest deduction on your federal income taxes. To take advantage of the home mortgage interest deduction, you need to itemize your deductions on Schedule A of Form 1040.
According to the Tax Foundation, only about 30% of income tax filers itemize their deductions. Everyone else either takes the standard deduction or has zero or negative income and were not able to take advantage of any deductions.
For tax year 2017, the standard deduction was $12,700 for married couples filing jointly. If you were single or married filing separately, the standard deduction was $6,350.
In tax year 2018 and beyond, the standard deductions are higher, much higher. The new standard deduction was $12,000 for singles and $24,000 for married couples filing jointly in 2018 and $12,200 for singles and $24,400 for married couples in 2019. In 2020, it was $12,400 for single taxpayers and $24,800 for married couples filing jointly. In 2021, the standard deduction was $12,550 for singles and $25,100 for married couples.
You would only want to itemize if your total deductions are more than the standard deductions. So if you combine all your deductions, like mortgage interest, charitable donations, student loan interest, and anything else on Schedule A, you need it to be more than $12,950 if you are single or $25,900 if you are married.
You May Not Get a 1098 Form
Because RVs are not houses in the traditional sense, it is very likely that you will not get a Form 1098 from your lender. It’s OK, you can still use the deduction. If you received a 1098, then you report this on Schedule A, line 10.
If you did not receive a 1098, then it will go on Line 11. You’ll need to send information about your lender, including their taxpayer identification number. If this was not provided to your statements, you may need to request their taxpayer identification number by sending them a Form W-9. If you don’t have this information, you could be subject to a $50 penalty for each failure to report the accurate information.
What About After the Trump Tax Bill?
The Tax Cuts and Jobs Act was a major tax reform bill passed in December 2017. There were a lot of major tax consequences from that law that affect you.
New Standard Deduction
Like I mentioned above, under the new tax laws that went into effect for 2018, the standard deduction was greatly increased with future standard deduction increases tied to inflation.
That makes it even more unlikely that you will have mortgage interest to deduct.
If you are single, that means you need more than $1,080 in deductions monthly before you itemize. If your RV interest is your only deduction, that puts you in the range of a $250,000 finance amount at 5.25% interest rate on a 15 year loan. And a half a million dollar motorhome if you are married. That’s some high end diesel pushers right there!
And as you pay the loan down and pay less interest every year, you’ll drop below the standard deductions unless you have additional deductions that you can itemize.
New Dollar Limitation on Home Mortgages
In 2017, the home mortgage interest deduction was for the first $1 million in indebtedness on the first and second homes. Under the new tax bill, this has been changed to $750,000.
There was some discussion on home equity loans and lines of credit and whether they would still qualify under the new limitation. On February 21, 2018, the IRS said that interest on these home equity loans would be deductible.
Fifth Wheels, Travel Trailers, and Towables
In December 2017, the Recreational Vehicle Industry Association (RVIA) scared a lot of people regarding whether fifth wheels, travel trailers, and other towable RVs would be deductible under the new tax laws.
And this rumor just won’t die!
First, this was much ado about nothing. Towable RVs are generally less expensive than motorized RVs because they don’t have an engine. (OK, not always, but often enough that it can be a general rule of thumb).
With the higher standard deductions, many people with towable RVs may not need the itemized deduction from the home mortgage interest deduction.
The Legal Analysis Stuff on Towables and Tax Deductions
Second, I have reviewed the text of the final bill. I am having a hard time trying to make the leap that the RVIA does that towables are not included. In fact, the logic doesn’t even make sense.
According to the RVIA, first and second homes can include RVs, but only motorized ones. They state that the “new law only allows deduction for “any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road,” which does not include towable RVs such as travel trailers and fifth wheels.”
Section 163 of the Internal Revenue Code is about the deductibility of interest in a variety of contexts. It’s a long and complicated section. But for this discussion, the relevant parts are subsections h and j.
Subsection h is the limits on home interest deduction. This is where the secured debt and qualified home requirements come from. Subsection j is on business interest.
The problem is that the language about self-propelled vehicles is in subsection j, specifically on floor plan financing interest. Floor plan financing is what the RV dealer uses when they buy the RVs that they will then sell to the public.
This limitation isn’t about you or me, this is about the RV dealership. Now, from an industry standpoint, it is something very important.
Don’t let the internet rumors scare you.
However, because of the higher standard deductions, you may not need to itemize your deductions to minimize your tax liability and thus not need the RV loan interest.
See Also: 10 Things to Know About RV Tailgating
Local and State RV Tax Deductions
Ad Valorem Taxes
An ad valorem tax is based on the value of your property. Many people are familiar with ad valorem taxes on their cars, if their home state charges them. In many states, you pay the ad valorem tax when you get your car’s annual tags.
These ad valorem taxes are typically deductible on Schedule A, like the home mortgage interest deduction. Any ad valorem taxes you pay on your motorhome would similarly be deductible.
Another value based tax that you paid is probably a sales or use tax when you bought your RV (unless you are in one of those states that doesn’t charge sales tax). So, if you are like me and bought in 2017, you may be able to take advantage of a sales tax deduction. This is another tax deduction that goes on Schedule A, so it’s available only if you itemize your taxes.
See Also: Think Twice Before Using a Montana LLC to Register Your RV and Avoid Sales Taxes
Limitation for 2018 and Beyond
Under the new tax bill, state and local tax deductions are capped at $10,000.
So if you recently bought your RV and plan on taking advantage of the sales tax deduction on your return due in 2023, you’ll need additional deductions to get over the standard deduction (state income tax deduction, mortgage interest deduction, charitable contributions, etc).
RV for Business Purposes
If you have an RV and are intending to use if for business purposes, good for you. But be careful about the personal use of the RV.
Sometimes, even trivial personal use could make it a dwelling and disqualify the business purpose, as the Jacksons found out in this court case.
If you want to use an RV for a purely business purpose, you are going to have to carefully document exactly how and why it is not personal use. You best consult a tax attorney on this one.
If you are only intending to deduct part of the use of the RV as a business expense, you may have some additional RV tax deductions available.
RV Tax Deductions for Business Miles
Depending on the hows and the whys, you may be able to deduct some mileage on your RV. The standard rate for 2017 was $0.535 per mile, in 2018, it was $0.545 per mile for the business miles driven. In 2020, the rate was $0.575 per mile and in 2021, it was $0.56 per mile.
For 2023, the IRS has announced that the standard rate for mileage deduction is $0.655 per mile for standard business use. That’s for miles driven in 2023 and reported on your return due April 15, 2024.
You could also use actual expenses to include gas, oil, tires, repairs, tune-ups, insurance, and registration fees. Because RV maintenance is so expensive and we typically get really bad MPG, you may come out better this way.
But again, you’ll need detailed logs of both the expenses and the personal vs. business use of the RV. You can only deduct the business portion of the expenses.
If you are going to use your RV in full or part in your business, you really should consult with a tax professional to see what will work best for your situation.
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Renting Your RV as a Business
One increasingly popular RV business for part-time RVers is to rent the RV out for others to use it.
If you rent your RV out as a business, you can gain additional business expenses and tax deductions. These expenses and deductions include depreciation, commissions paid to the rental management company, advertising fees, insurance, cleaning and other maintenance.
For more on residential rental property, see the IRS’s Publication 527 on Residential Rental Property.
Frequently Asked Questions about RV Tax Deductions
There are four primary tax deductions for RV owners:
– Mortgage Interest Deduction on first and second homes
– Sales tax deduction on the purchase of the RV
– State or local property taxes paid
– Business tax deductions for business travel, rental expenses, and depreciation
Yes, you can claim your RV as your primary residence for tax purposes, if your RV is the main place that you ordinarily live most of the year and the RV has the required sleeping, cooking, and toilet facilities. This opens up a lot of tax deductions for RV owners, including the home mortgage interest deduction.
Most Recreational Vehicles (RVs) meet the definition of a residence – they have facilities for sleeping, cooking, and toilet. This means that in the right situation, you can write off the interest you pay on your mortgage or RV loan as a second home. Vans and other modified RVs may not qualify if they do not have the cooking and bathing facilities.
There was a widely spread misconception that after the TCJA passed in 2017 that towable RVs, including travel trailers and fifth wheels, would no longer be eligible for the home mortgage interest deduction. That information was wrong. Both travel trailers and fifth wheels qualify as primary or second homes for purposes of the interest deduction.
RVs, like most assets, are not in and of themselves deductible. However, interest on a loan or mortgage for an RV is deductible if it qualifies as a mortgage on a first or second residence and within the borrowing limits.
Yes, RV loans qualify as mortgages or loans to make the interest tax deductible as a first or second home on U.S. federal income taxes.
In order for the interest on an RV Loan to be deductible,
– the RV must be the security for the loan
– the RV must have a sleeping area
– the RV must have cooking facilities
– the RV must have toilet facilities
Like so many tax and legal questions, it depends. This mostly depends on whether you will itemize your deductions or take the standard deduction. It’s going to come down to the math and since every situation is different, I can’t tell you whether your RV is deductible on your taxes this year.
The home office deduction requires that a space be used routinely and exclusively for business purposes. Very few people have dedicated spaces in their RV that is used solely as a home office for their business. Remember also that the home office deduction is not allowed for employees, only business owners.
RV campground fees could qualify as a lodging expense in your business, if you use the travel for business travel and not personal or recreational travel. Full-time RVers will not be able to claim their travel as business travel though, as they are not traveling away from their primary residence and duplicating lodging expenses.
When used in your business more than 50% of the time, RVs qualify for Section 179 expense deduction, up to allowable limits by property class. Section 179 does not apply if you report your RV as rental property on Schedule E.
Under the TCJA, bonus depreciation is 100% of the cost of the eligible depreciable property. This tax provision is good for RVs purchased after September 27, 2017 and before January 1, 2023. For RVs purchased in 2023 and after, there is a phase-out on the bonus depreciation.
If your state charges sales tax when you title and register your RV, you can deduct the sales tax paid for your RV on that year’s tax return. This is a one-time only deduction in the year you purchase your RV and pay the sales tax.
Final Thoughts to Maximizing RV Tax Deductions
Don’t buy an RV for the tax deductions! RVs are almost always depreciating assets and expensive to maintain. Any potential tax benefits just are not going to be worth it unless you enjoy the rest of RV life.
And now that I’ve done my taxes and deducted my RV as a second home…. it’s time to go enjoy an adult beverage.
However, after you buy, do take advantage of all the tax deductions and benefits to make an RV more affordable. So you can take more trips and more tailgates!
I know I’ve earned and so have you!
RV Tailgate Life does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
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I live in California. Purchased a 1995 Class B Roadtrek RV this year (2019). I paid cash for it but still needed to pay sales tax when I registered it with the DMV. Am I able to write off the sales tax? Thnx…
Rod, sales tax can be deductible on taxes, but it is going to depend on your personal tax situation. Also remember that sales tax falls under the state and local tax deduction, which was capped under the tax reform bill. I recommend that you seek the advice of a CPA to check over your taxes this year. They can give you specific advice about whether you can take the deduction or not for your tax return due April 15, 2020.
Enjoy your new to you Roadtrek!
You make a great point about consulting a tax pro for your RV. I just got an RV and I need to store it. I’ll have to make sure I can write repairs off.