This article is not meant to serve as official tax advice. Keep in mind that tax laws can change from year to year. Always cross-check your deductions with a certified tax professional before filing.
While most of us dread tax season, there are some RV tax benefits you should know that might actually help you look forward to that next April deadline. RV owners can get some tax breaks if they know where to look for them, and those breaks might even save you that extra cash you need to take another RV adventure this year.
Before we dive in, it’s important to mention that state tax laws are different. This article focuses on RV tax benefits when filing federal taxes, so be sure to look into your state’s tax laws to find all the relevant deductions you can enjoy as an RV owner.
Types of RV Tax Deductions
New and used RVs are both eligible for tax write-offs. Keep in mind that these deductions can only be claimed for a single tax year in which a corresponding event occurred. Here are a few examples:
- Sales tax paid on an RV purchase
- State or municipal property taxes
- Interest paid on an RV loan or mortgage
- Business tax deductions
Claiming deductions will require receipts to verify relevant sales and purchases. You will also need to fill out additional tax forms to receive these RV tax benefits. It is also worthwhile to evaluate whether your itemized deductions exceed the standard deduction.
If the standard deduction is larger than the sum total of your itemized deduction, you are probably best to stick with the standard deduction. So make sure to speak with a tax professional to determine all the applicable deductions for your recreational vehicle.
RV Tax Benefits Explained
Let’s go over those four main deductions and discuss whether or not your RV might qualify.
Sales Tax Deduction
The sales tax deduction is a one-time opportunity that will be available to you in the tax year that you purchased your recreational vehicle. It can be claimed if you paid cash or secured a loan to purchase your RV and this is often a significant amount that can help your itemized deductions exceed the standard deduction.
Please remember that you will be ineligible for this deduction if you live in a state that doesn’t charge sales tax. Otherwise, make sure you know how much you paid in sales tax on your RV purchase to take advantage of this important RV tax benefit.
Local and State Property Tax Deductions
If you live in a state that charges property tax for vehicles, you may qualify for this deduction. This vehicle property tax is usually a percentage of the total value of your vehicle, according to your state or municipality.
The property tax percentage will vary from state to state, but you may be able to deduct a maximum of $10,000 for combined state property tax and sales tax for your RV.
Loan or Mortgage Interest Deduction
Depending on the size and features of your RV, you may be able to deduct interest paid on your RV loan or mortgage, whether you live in it full-time or part-time. According to IRS Publication 936, “A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”
That means your RV could likely qualify as a main home or a second home and you may be able to deduct the annual interest paid on a loan or mortgage as long as your motorhome contains a bed, bathroom, and kitchen.
You will also need to finance your RV using a secured loan if you want to claim this deduction. With this type of loan, the RV itself is considered collateral in case you default. You may not claim this deduction if you purchased your RV with cash, a credit card, or a personal loan.
Here are a few more things to consider about this RV tax benefit:
- You may still enjoy this deduction if your RV changes from your main home to your secondary residence.
- You can claim an interest deduction on a second home even if you don’t use it (i.e. your RV is in storage all year).
- Interest on loans for vehicles used for towing, or being towed by, a recreational vehicle cannot be deducted.
If you claim your RV as your main home and you decide to sell, you may still claim interest paid up to, but not including, the date of the sale. There may be some exceptions for unique or homebuilt RVs, so you should consult a qualified tax professional before making any assumptions that your RV fits the criteria.
We also encourage you to learn more about IRS Form 1098, as to whether or not you receive this form from your lender will determine where and how you claim this dedication on your tax return.
Business Tax Deductions
Do you use your RV for business purposes, such as renting it out when you’re not using it? If so, you may write off some of the expenses associated with your business venture. The exact deductions you’ll qualify for will depend on whether you use your RV solely for business, for a combination of full-time living and work, or a mixture of personal and business use.
Before we go over the general outlines for these scenarios, we want to encourage you to talk with your tax professional to find out what qualifies as an RV business tax deduction for your specific situation.
RVs Used Solely for Business
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. Even using it a few times a year for personal trips can disqualify it from being a full business deduction.
Full-Time Living and Work
If you live in your RV full-time and work inside it too, then you may be able to deduct certain business-related expenses, depending on what they are and if they are used solely for business purposes.
Mixed Personal and Business Use
If you rent your RV, you can write off expenses accrued through that venture. This applies whether you have your RV parked on your property as a rentable accessory dwelling unit (ADU) or you utilize a service like Good Sam RV Rentals to find renters.
Renting is an attractive way to recoup your initial RV investment more quickly. And you may be able to claim deductions for things like depreciation of assets, advertising fees, rental insurance, maintenance costs, and commissions taken by a rental management service.
Keeping meticulous records is the key to qualifying for business deductions when using your RV for business and personal use. You should know exactly how many nights you rented your RV out versus how many nights you personally spent in it.
This is very important when considering whether you can claim business deductions in conjunction with a home mortgage deduction. You will only be able to claim that home mortgage deduction if you use your RV as a home for a minimum of 14 days or more than 10% of the total days it was rented for. The greater of these two numbers will determine your personal threshold for qualifying for the home mortgage deduction.
Final Note on RV Tax Benefits
You should never make assumptions when dealing with taxes. When preparing your taxes, we highly suggest working with a certified public accountant or tax professional to ensure that you understand the laws both federally and locally.
Recent changes to tax laws may impact whether or not you qualify for certain deductions, which is why it’s smart to work with a professional who knows and understands tax law.