Thinking of taking a trip away from your motorhome or RV? Plan on renting it out while you are gone. Keep these tax rules in mind. Now you can plan ahead for taxes when renting out your RV or vacation property.
Renting out your RV
Many owners rent out real estate while they travel. Others use rental websites to earn a little extra cash while they aren’t using their RV. In addition to the standard maintenance, owners should be aware of the tax implications of residential rentals including RV and vacation homes.
Receiving money for the use of a dwelling also used as a taxpayer’s personal residence (your RV) generally requires reporting the rental income on a tax return. It also means some of the expenses become deductible reducing the rental income that’s subject to income tax. So let’s learn all about taxes when renting out your RV.
This may be a house, RV, an apartment, condominium, mobile home, boat, vacation home or similar property. It’s possible to use more than one dwelling unit as a residence during the year.
Used as a Home
If you use your dwelling unit more than 14 days or 10% of the total days rented to others at a fair rental price, you will have to prorate rental expenses and keep in mind rental expenses cannot be more than the rent received.
Personal use means use by the owner or owner’s family and includes anyone paying less than a fair rental price.
However, if you stay at the property to complete maintenance work, that time period does not qualify as personal use. This includes staying in the RV to repaint or fix a broken A/C.
Do you own a house, trailer or RV that is used 100% for rentals? This means you spend no time at all living in the home or RV. Then have no fear. You can deduct all expenses related to that rental.
Special rules generally apply to the rental of a home, apartment or another dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes. You need to compute the percent of time used for personal vs. rental. Once you get that percentage you can figure out deductible expenses. Expenses include the cost of insurance, property taxes and any interest on a loan.
If you need special insurance for covering it as a rental, that is a fully deductible expense.
100% Deductible Expenses
Fees for listing on a rental site, specific insurance to cover the rental period and repairs directly related to the rental (a renter breaks something and you need to fix it) many times are 100% deductible up to the income you received. This applies if your rental is split between personal and rental use.
If you have a 100% rental property, then these expenses are usually 100% deductible no matter the income. So even if the expenses create a loss, you can take them.
The loss is limited to $25,000/year. However, any loss greater than the $25,000 is carried over to future tax years. This loss limit may also be limited by your adjusted gross income.
How to Report
If your Schedule A deductions add up to more than the Standard Deduction, you will use Schedule A to report deductible expenses for personal use on the rental property. This includes such costs as mortgage or loan interest, property taxes, and casualty losses.
If the dwelling unit is rented out fewer than 15 days during the year, you don’t have to report any of the rental income nor can you take any of the rental expenses as deductions.
Does this all confuse you? Don’t know where to begin tracking and filing numbers. Feel free to reach out for help with filing your Schedule E as part of your income tax return.
What else would like you to know about taxes when renting out your RV? Ask below.