So you want to purchase an RV. Get the most from your money by catching up on the latest tax buzz surrounding RV purchases to make sure all your fun doesn’t go to Uncle Sam. Don’t get us wrong, we love America as much as the patriot standing next to us. We don’t have a problem paying our taxes where they’re due, and we love reaping the benefits of our nation as a result of these tax dollars. But why pay more when you don’t have to? These simple tips will help you keep your money in your pocket.
What is a second home?
According to the IRA’s definition, RVs can be considered a second home for tax purposes if it has a kitchen, sleeping area and bathroom. You don’t even have to live in your RV full-time for it to qualify. As long as you don’t rent it out, you don’t have to worry about whether or not you need to prove how many days you were using it. If you do choose to rent out your ride, you have to prove that you have used it at least 14 days out of the year or it will be considered a rental property rather than a second home.
Get to the good stuff
Your tax break isn’t as cut and dry as you would hope (it never is with bureaucrats, right). A tax break is given for the amount of interest you pay on your mortgage of the vehicle. Your rig will need to be financed with a bank using the RVor your primary home as collateral. If you pay with money withdrawn from a retirement or personal account, pay with cash or use anything but your RV or primary home as collateral, the tax break is no longer valid.
Is there more?
RVs are not real estate, so you can’t take the real estate tax break. But, you are offered two other tax breaks as an RV owner (according to the 2015 laws). The first is that you can deduct all taxes added to your purchases throughout the tax year, so save those receipts! The second option is to deduct all state and local income taxes for the year. You can choose one or the other, but not both. If you’re planning to deduct your purchases, you might even consider taking photos of your receipts or making copies of them so the thermal ink doesn’t fade over time.
Whether you’re purchasing your RV as a primary or secondary home, it’s important to discuss the tax issues that may arise come April. While these are important to consider, you shouldn’t base your decision on whether or not to purchase a rig solely on the tax benefits – you might end up having to make costly maintenance payments that far outweigh your tax deductions. Hopefully you don’t find yourself in this boat, but it’s definitely something to keep in mind while you’re making your purchase.
These are just some simple, overarching guidelines to consider while you’re looking for a new ride. Be sure to check with your CPA for local and state laws in your area before your purchase so you know what to expect when tax time comes. Getting a tax deduction is just one perk of being an RV owner. The real joy is the freedom you have to share your travels with friends and loved ones. There really is nothing like it. Keep these benefits in mind as you look forward to beginning (or continuing) your Good Life.