Unfortunately, for us RV owners who full-time, some of our deductions are limited as compared to a sticks and bricks homeowner. However, there is some overlap. As an RV full-timer myself, I understand the limitation of tax deductions for RV owners. I also get asked similar questions often. Let’s dive into the top 4 questions I get about deductions for RV owners.
1. Can I take the interest on my RV loan?
First, the basic tax deductions for RV owners include loan interest, sales tax, and personal property taxes. Keep in mind they are only available to taxpayers that have enough deductions to itemize using Schedule A. That eliminates most full-time RVers because they no longer have a sticks-and-bricks with a mortgage and real estate taxes. Without the mortgage interest deduction, most RVers don’t have enough deductions to itemize. The standard deduction works out better for most. (There are exceptions to this, so get in touch to help with your specific situation.)
If your deductions add up to more than the standard allowed for your tax situation (single, head of household, married filed jointly), you can include your RV loan interest on your Schedule A itemized deductions. If you own a sticks-and-bricks home, then your RV (cooking area, bathroom and sleeping space) qualifies as a second home. This means you can take the interest from both your sticks and bricks home and your RV on your itemized deductions.
To sum it up, you can deduct RV loan interest IF 1) the loan is secured by the RV, 2) you have enough deductions to itemize on Schedule A, and 3) you are NOT already taking a mortgage interest deduction on 2 other homes.
2. I work from my RV. Can I take the home office deduction? If not, what deductions can I take?
Before I go any further, I want you to keep in mind that you can deduct actual business expenses regardless of qualifying for a home office deduction or not.
With that said the home office deduction can only be taken for an office that is used 100% exclusively for business purposes. Usually, with a small home like an RV, there isn’t enough space to dedicate to an office exclusively and it would be VERY difficult to prove exclusive use. Plus, because the area used for business in an RV is so small, it usually isn’t worth the time and trouble to make the calculations and keep the documentation. I would highly recommend not taking this deduction and look at other business expenses for deductions.
In recent years, the IRS does allow for a simplified home office deduction which makes it easier to compute ($5/square foot up to 300 square feet), but once again keep in mind the office must be exclusively used for business purposes. If you have a specific question for your unique situation, talk to a tax professional for some guidance.
In any case, you must keep concise records. Lack of documentation alone can get your deductions denied by the IRS. The IRS does offer Publication 587 – Business Use of Your Home and it can be a valuable deduction for those with a larger home and a designated office space. However, I reiterate it usually is not worth raising the red flag and taking this minor deduction for those living in a small space like an RV.
3. Can I claim my RV mileage as a deduction? Can I deduct business expenses for my car?
I would not take business mileage of an RV since it is your home. However, you might qualify for some mileage deductions on the business use of your car or truck. It depends on specific facts and circumstances of the mileage. If you use your truck or towed vehicle to get to a specific job, client or to run business errands, then those miles count.
Since your car or truck is most likely used for both business and personal use, you will divide your expenses between them based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses for further details and to see standard mileage rates for each year. It’s always best to keep detailed records using paper, spreadsheets or an App like MileIQ to help you keep track of mileage accurately. Then it can be determined if those miles would count towards a deduction or not. Plus, then you have the proof you need to prove business use of the vehicle.
There are 2 different ways to take auto mileage deductions. One is the standard mileage rate x the business mileage. The other is the division of expenses (insurance, maintenance, gas, etc.) for personal and business use. You’ll need to do the math here to figure out which is better for your situation. I typically find that the standard mileage works out to be a larger deduction.
Once again each situation is unique. Be careful about raising a red flag with the IRS. It can get sticky pretty quickly and without detailed records, it can be hard to prove. I always say it’s best to avoid raising suspicion for what is often a very minor deduction.
4. Can I deduct my RV sales & property taxes?
The short answer here. Yes, if you have enough deductions to itemize. No, if your deductions don’t add up to more than the standard deduction.
If you itemize deductions on a Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes. If you live in a state with income tax, it’s best to work out the math for each.
Typically in a year, you purchase an RV or even a car/truck, you might qualify for the sales tax vs. the income tax. It also depends on the tax rate and your personal income. For anyone with a domicile state without an income tax, the sales tax deduction (especially with the purchase of a large item such as an RV or car/truck) might be the way to go.
Many full-timers are domiciled in states that don’t have personal property taxes and several states don’t even have personal property taxes, to begin with. Obviously, if you don’t pay this tax, you can’t deduct it.
If your domicile state has personal property taxes, you can take this deduction on any car, truck, and RV. If this is the case, then include your RV personal property taxes. However, once again, if you don’t have enough deductions to itemize, you can’t take this deduction.
What do Ido?
As a full-timer without a sticks-and-bricks home, I don’t have enough deductions to itemize. I also do not have personal property taxes on my vehicles. I do, however, have business use of the truck which I do deduct.
Home Office Deduction
Although I took a home office deduction when I owned a house, I don’t since moving into the RV. I understand that our RV expenses are personal. It is the lifestyle I chose and is unrelated to running a business. The RV is simply my home and the costs of upkeep, insurance, etc. are not related to running our businesses.
Phone and Internet
I am able to deduct my cell phone charges since I have 2 plans & 2 different numbers – one for business and one for personal. I also take office supplies, business postage, advertising costs, software for business purposes, website hosting, contractors, and anything else that is directly related to the production of my business income.
Lastly, internet costs should be split between business and personal use. This means keeping track of business use vs. personal use for a month or two and make that your average.
Example: You use 75GB of internet during a month. Let’s say the business use is 45GB. 45/75 = .6 This means you take 60% of internet costs as a business expense.
I do deduct mileage for running business errands or attending a business meeting, it is always well documented with any receipts scanned and business purpose recorded. Travel can be a tricky deduction so I urge you to learn more.
I keep track of all of my mileage using an app. In addition, I write down beginning and end-of-year mileage for the truck to be able to calculate the percentage of business use. I usually use the standard mileage deduction since it usually works out higher. However, with high maintenance costs, the percentage of actual expenses might be higher.
Needless to say, I keep very good records. This is so I can back up all our income and expenses as reported on my tax return. I will take any deduction allowable to us, but nothing that will raise red flags. The last thing I want is the headache of an audit.
What’s your burning question about RV business expenses?