In the last couple of years, the sales of RVs have skyrocketed. More and more people are taking up the RV life (many are heading here to Idaho!) and some of them may not be aware that there are tax deductions associated with RVs. If you have purchased an RV this year, depending on the state where the purchase was made, that alone may offer you some tax advantages.
If you are considering purchasing an RV, you may want to do some research into which state is best for tax purposes. If you have decided to domicile in a particular state, using that state as your permanent address will also affect your tax rates and deductions.
However, let’s be clear: this is not professional tax advice. We simply want to remind you of the possibilities and encourage you to speak with a tax professional. Secondly, the standard deduction may cover any possibilities if the amounts are not sufficiently significant for a separate inclusion.
Mortgage interest deduction
The greatest deduction may be in the interest you pay on the loan. If your RV is your primary home, and your loan is secured through customary channels, such as a bank, interest can be a deduction. Trailers or towable vehicles are not eligible for deductions. However, if you use your RV as a second home and have a secured loan, interest deductions still apply. A secured loan is one made by a bank with the RV held as collateral.
Sales tax deduction
If you paid sales tax, about 23 states include a deduction for sales tax paid on large cost items. This includes RVs. This is a one-time deduction, even if you paid cash.
Five states do not charge sales tax and so no deduction is possible: Alaska, Oregon, Montana, Delaware and New Hampshire.
Not every state permits registration fees to be deducted from your taxes, but it can be an asset for you if you purchase in a state that does. Registration fees also vary from state to state. Some states determine the fee by the weight of the vehicle, some prorate by age, and some use the vehicle’s value.
Many people run a business out of their RV, or move their RV from place to place for work. Remote work and contract work (“gigs”) are common now. An RV can be the perfect solution to these jobs. Your home goes with you!
Using your RV office has the same tax benefits, and the same tax requirements as a home office. When you travel and live in your RV for a job, you also can use a mileage deduction. Business miles and campground/park fees become business expenses. As for any office, you must keep meticulous records showing the business relationship to your location. Use Schedule C on your tax report.
Renting out your RV
When renting out your RV, you are also conducting a business. Be aware that you must live in the RV at least 14 days of the year or more than 10% of the days it was rented (whichever is greater) in order to maintain the deduction for any mortgage interest. Before deciding whether to rent, consult a tax professional or check out the IRS’s Publication 527 on Residential Rental Property. Record keeping is essential here.
Property tax deduction
Again property taxes vary from state to state and whether any part of that can be taken as a deduction varies as well. RVs may be considered “personal property” in some states and taxed as such. There is no shortcut to setting up your priorities and doing some research.
Idaho provides a superb location for working or living, with its much lower cost of living rate. Currently, Idaho is the fastest-growing state, and its moderate rate of expenses is largely responsible. With a cost of living index 2.4% lower than the national average, you may want to explore the options RV living at Mountainbound Custom Storage and RV Park could afford you.