Tax Deduction for Business Use of RV

I know that there have been many questions and answers on the Forum over the years regarding the availability of tax deductions for using your RV for business purposes. The Tax Court has ruled that RVs can be considered as business use of home. However a new ruling last summer in another Tax Court case basically threw out business deductions for use of the RV. Personal property taxes and loan interest, if qualified, are still deductible on Schedule A-Itemized Deductions, but not operating expenses. See all the gory details by doing a search on "? Jackson, T.C. Memo. 2014-160, August 7, 2014". The basic issue was that business use of home requires business use of the area solely and exclusively and the court found that an RV simply doesn't work in that respect unless you have a purpose built RV with a separate room. Even sitting on a couch and watching TV for a couple of minutes or walking thru it between rooms disqualifies the space. Talk to your tax accountant as to how much, if any, of your travel mileage expenses might be deductible. I have a feeling that the ruling would disqualify that as well.

Bernie,

Good report and nice to hear from you! I was never one to tempt that business use of the home for the reasons you describe and probably would never consider an RV in that light.

But I would like to be the devil's advocate, and hear your thoughts about mileage to and from a work engagement. Does the IRS pick on some forms of transportation and not on others, or is mileage just paid by the mile, regardless? I always had that issue using my own airplane to travel (which is another whole can of worms).

If I choose not to fly commercially, and move my motorhome instead, are we in a tax no-man's land?

Kim

Keep on dreaming ... 

Hi guys, new member of the forum without much RV knowledge. I am a CPA with 30 years of practice, so I do know a bit about this topic.  I read the Tax Court case and I agree with the conclusions reached by the court.  The taxpayers attempted to write off their RV (via depreciation) as a business asset.  The tax law doesn't allow you to do that, with a dual-use (personal and business) asset.  In their case, the RV was undoubtedly mostly personal use, although they did a limited about of business while using it.  The primary purpose for their RV was personal enjoyment, not business.  The court did say they could deduct interest paid and taxes, as personal expenses, but no way should they get business deductions for depreciation.

As far as the question goes for claiming business mileage, the IRS doesn't care if you drive your RV or a Mini Cooper - the mileage rate is still 57.5 cents a mile.  So, if you drive your RV for business reasons, you can claim mileage deductions.  BUT, the mileage must be for business, not personal and not commuting.  If I were to drive my 37' RV to a client meeting, I would get to deduct 57.5 cents a mile.  If I were to use it to commute to my office or to drive to the grocery store, no deduction.

Good report, Bernie, and thanks to Colorado as well for the confirmation.

I don't see this (the Jackson reference) as anything new. It's been nigh impossible to deduct part of an RV as an office or business expense or asset since the "sole & exclusive use" provision went into effect some years ago. Tough enough even in a stick hose with actual dedicated space.  Frankly I'm surprised the case got as far as it did.

Agree with all that.  We were able to deduct two rooms of our previous home because they were used exclusively for business and could be closed off from the rest of the house.  They also were our ONLY place of business so it was clearly a sole usage situation.  For mileage we kept a log of where we went and the miles covered to determine business mileage.  We had one car for business and one car for personal.  Jerry worked with auditors so we knew we had to have clear cut lines and were very careful in that respect.  Another thing is to keep financial items separate.  For example, a separate checkbook for personal usage and another for each business if you have more than one (some people do).  We were audited a couple of times and came through with flying colors each time.

ArdraF

skyking4ar2 said:

But I would like to be the devil's advocate, and hear your thoughts about mileage to and from a work engagement. Does the IRS pick on some forms of transportation and not on others, or is mileage just paid by the mile, regardless? I always had that issue using my own airplane to travel (which is another whole can of worms).

If I choose not to fly commercially, and move my motorhome instead, are we in a tax no-man's land?

Kim

Click to expand...

Kim

57.5 cents/mile (for 2015) is strictly an alternative "safe harbor" method of calculating allowable motor vehicle expenses. IIRC, my coach's actual cost per mile was about $1, so that would have been the preferred deduction. Actual expense is the primary method. As long as you could justify the airplane travel as a business expense, you could deduct the actual cost per mile of operating it on your business trips. The primary thing to remember is that you have to justify the business purpose of the trip. In the Jackson case, Jackson had too much personal in his travel and in his coach preventing any of his business deductions. In Jackson's case, if he had rented a booth and been a vendor at the function and conducted his business at the booth, he should have been able to deduct the mileage expense for the trip between his home and the function. If there was any personal activity during the trip, that could have reduced his allowable deduction.

The whole story is, as Ardra mentioned, that there has to be an iron curtain between the business portion (deductible) and personal portion (not deductible). Talk to your knowledgeable EA (IRS Enrolled Agent), CPA or tax accountant before you you do anything that could have any tax impact. I've have seen too many clients that have paid penalties, structured a transaction improperly or lost deductions because they talked to a friend, or even their bank or broker, who said that they could do something and the advice was wrong, and costly.

It is so good to see you (and your excellent financial advice) back on the forum, Bernie.  Hi to Marlene!

One other aspect for full-timers. Unless the rules have changed since 2000, If you don't have a real home base ( Mail based not accepted) somewhere there are NO travel related deductions allowed. The IRS will consider you a itinerant worker.
Travel expenses are only allowed from your homebase to a legitimate remote work site - or sites, it can be a multi-stop trip.
No home, no deductible travel expenses. I had 2 CPAs verify this.

One of my former employers always paid for my travel and campgrounds, but I had to include that in taxable income.

Ken & Sheila said:

One other aspect for full-timers. Unless the rules have changed since 2000, If you don't have a real home base ( Mail based not accepted) somewhere there are NO travel related deductions allowed. The IRS will consider you a itinerant worker.

Click to expand...

No change.

Bernie,

It's good to hear from you again on the forum. 

ken

Ken, that was exactly what my CPA told me when I asked him that same question in 1997 when we first went full time.  I could take a travel deduction for the driving from our campground to the client, but nothing for driving the motorhome to the client's city.

Welcome back, Bernie.  Good to see you around here again.

My two brothers, daughter, and Son- in - law are CPA's. The feeling was that why give the IRS a reason to audit you.  Unless you were 100% legit.  Once they find something, they are like dogs after a frisbee. RELENTLESS!  This came up trying to avoid paying the state sales tax by incorporating.  You have to ask yourself; is it worth it?

Thanks for all the welcome backs, tho I've never really left. I have posted a few messages over the last couple of years and try and read interesting posts on the Forum every week or two. Still miss the life and particularly all the friends we've made and camped with over the last 15+ years.