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 income taxes when renting out your RV.
Renting out your RV
Many RV owners use rental websites such as Outdoorsy 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 income tax implications of RV rentals.
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.
Let’s learn all about income taxes when renting out your RV.
Dwelling unit
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 home throughout the year. For example, you can spend 6 months in your RV and then the other 6 months in your condo.
Personal use
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.
100% Rental
Do you own a trailer, motorhome, or campervan that is used 100% for rentals? This means you spend no time at all living in the RV. Then have no fear. You can deduct all expenses related to that rental on your income tax return.
Divide expenses
Special rules generally apply to the rental of a 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.
100% Deductible expenses
Fees for listing on a rental site like Outdoorsy and repairs directly related to the rental (a renter breaks something and you need to fix it) are 100% deductible. This applies even if your rental is split between personal and rental use.
If you have a 100% rental property, then expenses are usually 100% deductible no matter the income. Even if the expenses create a loss, you can most likely take them on your tax return.
How to report taxes when renting out your RV
Typically, I suggest using Schedule C to report RV rental income and expenses of your RV as part of your 1040 income tax return because you are usually running a business for profit. However, there are times when a Schedule E might be more appropriate. I suggest talking to a tax professional to understand which form is right for renting out your RV.
Schedule C vs. Schedule E
Let’s dive a little deeper into the differences by looking at the 7-Day and 30-Day Rules. Rentals are generally passive activities. However, an activity is not treated as a rental if either of these statements applies:
- The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner’s behalf) provides significant personal services.
- The owner (or someone on the owner’s behalf) provides extraordinary personal services without regard to the property’s average period of customer use.
If the activity is not treated as a rental, then it will be treated as a trade or business, and the income and expenses, including prorated interest and taxes, will be reported on Schedule C.
Let’s look at an example.
You rent out an RV which you used 60 days in a year. You rent it for 100 days during the year with an average rental period of fewer than 7 days.
The total income you received from the rental is $20,000 which is $200/night. This means your RV is used 63% for rentals. You will use Schedule C to report this income because of the average rental period.
Maintenance (Oil change, fix a broken refrigerator, etc.) $2,000
Listing Fees $1,000
Storage Fees $1,200 x 63% = $756
Phone for communicating with renters $600 x .63% = $378
RV registration $500 x 63% = $315
RV property taxes $400 x 63% = $252
Your total expenses will be 2000 + 1000 + 756 + 378 +315 + 252 = 4701
Your net profit from the business would be
(income) $20,000 – (expenses) $4,701 = (net profit) $15,299*
*There is also an allowable depreciation expense which I’m not taking into account here to keep things simple.
If your Schedule A itemized deductions add up to more than the Standard Deduction, you will use Schedule A to report deductible expenses for the personal use of your RV. This includes costs such as RV loan interest and property taxes.
Other licensing
Please consider that this post is related to reporting income taxes on a federal and state annual tax return. It does not cover local licensing or sales tax or rental tax. Yes. You may need a business license if you are renting out an RV as a business. Local licensing requires research on your part to know what licenses are necessary to operate a business in your locality and what sales or other taxes are required to be collected from your customers.
Many states consider RV rentals an auto rental and require you to get a license for this. This means you’d also have to collect and remit this tax to the right state authority. You need to research the rules in your state to see if this is required or not. Again, this post is related to income tax reporting and does not cover licensing issues, sales tax collection, and other requirements by local authorities.
What confuses you about income taxes when renting out your RV?
