Deduct Your Dream Motor Home

For reasons that escape me, Renee is one of those people who always wanted to get a big motor home and cruise the country. After the weather we’ve seen this year, I imagine a lot of people would like to have a portable home so they could drive to wherever the climate is hospitable.

What most people don’t know is that the tax write offs can make owning that dream motor home more affordable.

The biggest and easiest write off to get for your motor home is the itemized deduction for interest payments on debt used to purchase the vehicle. You can deduct the interest under the same rules that govern mortgage interest deductions. Your motor home qualifies as a “residence” as long as it has cooking, sleeping, and toilet facilities. Interest on debt used to acquire a first or second residence is qualifies as an itemized deduction.

A few rules have to be met. The amount of the debt cannot exceed the value of the residence at the time of purchase, and the total debt on your first and second residences cannot exceed $1 million. The debt also must be secured by the residence.

An alternative is to use the proceeds of a home equity loan against your principal or second residence to purchase the motor home. As long as the total of your home equity loans does not exceed $100,000 and the loan is secured by your residence, the interest should be deductible.

In fact, if you already have paid off your motor home and find a lender, you can borrow against the motor home and deduct the interest as home equity interest if the motor home is your first or second home.

In many states, you have to pay personal property taxes on the motor home. Those taxes also are deductible as itemized expenses on your tax return.

What about deducting more than the interest and taxes? That is possible if you use the motor home for business, for example, if you aren’t fully retired or have a retirement business and travel frequently for that business.

Here’s an example from one of my favorite tax cases. The case involved a doctor who often worked for several days in a row at a hospital about 30 miles from his office. Rather than drive home every night, the doctor preferred to stay at the hospital. In addition, the doctor preferred to take his $200,000 motor home to the hospital’s parking lot instead of staying at a motel. He kept careful track of the miles the motor home was driven and the purpose of each trip. At the end of the year he totaled his costs of owing and operating the motor home, determined what percentage of the mileage was business for driving to the hospital, and deducted that portion of the costs as a business expense.

The IRS didn’t like it. But the Tax Court said that the doctor was away from home overnight for business. That meant the transportation and lodging expenses were deductible. The fact that he lodged in his transportation vehicle and preferred to stay there instead of in a motel didn’t affect his ability to take the deductions. As long as the cost of the motor home wasn’t extravagant under the circumstances, the expenses were deductible. (Hoye, T.C. Memo 1990-57)

Another way to get deductions for business is to have the motor home considered an “entertainment facility” by making it available to all employees for use. The value of the use is included as gross income in their W-2s. Then all the expenses of owning and maintaining the motor home can be deductible by the business. The rules are tricky. So be sure your tax advisor studies Section 274 closely before setting up your program.

You also might be able to deduct some motor home costs as medical expenses. All travel for medical care is deductible at the standard per mileage rate of 10 cents per mile. Lodging to obtain medical care out of town might be deductible at a maximum rate of $50 per day. Using a motor home to travel for medical care has not been tested in the courts yet.

If you want to own a motor home, the tax code can help you pay for it.