Best approach to writing off RV for business

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NY_Dutch

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cwh33 said:
@jim_manley, I know you posted over 12 months ago, but can you point to IRS rules online that allows the write off based on time spent?  I've been trying to find this info but haven't been able to.  My wife is planning to use an RV for her business but it will be parked 95% of the time and not traveling to clients.  If we can base it on time instead of on miles driven, that is a huge benefit to us.

This would be another instance were a discussion with a qualified tax professional would be beneficial...
 

Gary RV_Wizard

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cwh33:  There are no specific rules that address RV usage in a business. It gets complex because it is a vehicle, a portable office & warehouse, and possibly a piece of equipment as well, so a variety of rules can apply.  You probably need a tax professional to figure out if and how you can deduct any or all of those things. 

Mixed use of an RV is often problematic because it is difficult to establish what is business vs personal in it , but many of the difficulties can be avoided if the RV is used exclusively for business purposes. Or almost exclusively, e.g. 50 weeks/year.  You may be able to think of it like a rental property that is used to generate income most of the time but used personally by the owner for a few weeks each year.


The notion of pro-rating a deduction based on percentage of use is well-established in tax law.  How that percentage is determined can vary depending on the specific situation and type of equipment. Pro-rating is often done based on whatever is commonly used as a measure for the type of property, e.g. hours of operation, square footage of space, mileage, weeks or months of usage, years of useful life, etc.  Again, you will probably need a tax professional to help determine what method(s) can be applied to your particular use.
 

cwh33

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Gary,
Thanks for the response.  We've been trying to find a tax professional who is familiar with this area of the law and specifically how it works with IRC 280A.  So far, no luck other than one CPA who offered to do the research after the July 15th filing deadline (it seems many CPAs are busy with the extended tax season).

We have a very specific situation where it would be used for my wife's business only for 10-11 months of the year (primarily parked in our back yard and used as an office for her and for client meetings).  The rest would be when it is used purely for personal for vacation or family visits.  I'm yet to find anyone who can really explain how we should handle that other than one person who said just forget trying to depreciate it.  We could do that, but it doesn't make sense when the primary reason for purchasing is to use as an office during COVID-19 when she can't safely go to her rented office in a large office building due to health concerns.

Chris
 

Gary RV_Wizard

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Maybe you are looking for a degree of clarity that simply doesn't exist.  There are some basic principles of work-use deductions that apply and those are used to evaluate each particular situation.

From the modest amount of research I've done on the subject, the crux of the matter is the requirement that whatever the space is, it must be used exclusively for business purposes.  That pretty much means you cannot deduct an RV if you also live in it, since few RVs are made in a way that would allow a part of it to be "exclusive" for business use and the rest personal.  The exception to that is for workers who job is mobile and thus their living quarters are also deductible.  A parked RV used only as an office, however, would seem to qualify as exclusively business use.  And if you aren't traveling in it, you don't need to claim deductions for vehicle operating expenses, thus avoiding that whole class of deductions and related rules.  You may be able to treat it as a portable building rather than a vehicle.

The other principle that seems to apply is that a deduction can be prorated if it is only valid for part of a tax year.    An obvious example would be if you went out of business before the end of the year, but the same principle applies to temporary quarters as well.  If you are using a building or space exclusively for business for part of the year only, that part is deductible.  Depreciation of the asset could get tricky, though, and I don't claim any knowledge about that.


There may be some bookkeeping tricks that make documentation of the deduction simpler. For example, have the business own the RV and then rent it out when not needed for business. In effect, you would rent to rv from your wife's business when you want it for personal use. Sounds whacky, but it clearly establishes the boundary between business and personal use.  The objective is to avoid any gray areas - at any given time the RV is always either business or pleasure, but never some of each.
Try to come up with a rationale based on simple principles and run it by a CPA or tax attorney to see if he thinks it passes muster.  You will get an answer much faster than that way than asking them to figure out how you can do it.  If they tell you that you've run afoul of some regulation, you can discuss how to avoid that. It's rarely clear-cut, though.
 

muskoka guy

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Previous advice from my accountant on many similar situations. Sometimes it just isn't worth it to try to claim something that may "red flag" you with the tax services. Even though we always ran our business 100 percent on the legal side, sometimes trying to add write offs that are questionable between business and personal get extra scrutiny from tax services. As I stated in a previous post, my 4 wheeler and boat are 90 plus percent business use. My accountant only recommended a 50 percent write off for said reasons. Having an accountants advice is always best in these situations.
 

cwh33

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Thanks Gary. Hopefully we can find a CPA or tax advisor who can help.  I'd be fine with renting it from the business to us as needed if that is how to do this best.

Muskoka Guy, I get that.  I just hate leaving money on the table when we are going to be using it only as an office for > 80% of the year. 
 

Gary RV_Wizard

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Looking back at your original description of how the RV would be used, it appears you and your wife would be living in it at the same time as it is used as a mobile office for customer visits.  THAT makes any sort of deduction problematic, since it is very difficult to establish that any part of the RV is dedicated to business use.  You can't even deduct a room in a fixed house if it part-time living space and part-time office.

Jim_Manley's earlier reply from May 6, 2019 addresses the problems with defining and documenting time-share and space-share use in an RV.
 

cwh33

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I think I may have not been clear.  We would not be staying in the RV or using it for personal purposes at all for ~10-11 months of the year.  It would only be for business use (and no one would be sleeping in it, we would be in our house).  About 3 times a year, she closes the business for us to travel to see family and we'd like to just take the RV for those trips in the future so that would be 100% personal for those 4-6 weeks each year (we'd remove the desks, printer, monitor, etc. used by her office for the personal trips and then put them back afterwards).  So, it's never to be used for both personal and business at the same time, but would rotate between personal and business at different times of the year with the vast majority being business use only.
 

Dreamsend

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I think you'll find some basic information about your question at the following:

https://www.forbes.com/sites/peterjreilly/2014/08/25/home-sweet-rv-does-not-always-produce-best-tax-result/#7c77b8b65f5c

And, this issue has been adjudicated in tax court, and the underlying IRS code on which the court relied is found here: 26 U.S. Code ? 280A

https://www.law.cornell.edu/uscode/text/26/280A

The bottom line according to the tax code is that if you use the "dwelling unit" (yes, an RV is a dwelling unit for IRS purposes) for 14 days or more for personal use, as you state you are planning to do, then none of its business use can be claimed as business expense and therefore be deducted.

A Google search turns up many, many articles on this issue. 

https://www.google.com/search?safe=active&sxsrf=ALeKk02hpM6VPbDq9_xyVd9NHuFRM_moCA%3A1592290672594&source=hp&ei=cG3oXs-KIpfn-gTf-qP4Dg&q=irs+use+rv+for+business&oq=IRS+using+RV+for+business&gs_lcp=CgZwc3ktYWIQARgAMggIIRAWEB0QHjoECCMQJzoFCAAQgwE6BQgAELEDOgIIADoGCAAQFhAeOgUIIRCgAToFCCEQqwI6BwghEAoQoAE6BAghEApQhxlYsmNguKsBaABwAHgAgAHNAYgBtyCSAQYwLjIzLjKYAQCgAQGqAQdnd3Mtd2l6&sclient=psy-ab

If nothing else, you now have the relevant IRS code section which you can provide to a tax specialist accountant who should be competent enough to dig into the IRS jargon and advise you accordingly.

Linda
 

Gary RV_Wizard

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I think I may have not been clear. 
My mistake.  I looked back at the original post in this topic but it was by tiffinboise, not you.  That usage was different than what you describe.  Yours seems a fairly clear-cut case of temporary office use without the complications of vehicle expenses or shared personal & business use.
Start out by avoiding any statement about deducting for an RV, because that really muddies the waters. You want to deduct for temporary office space, which ought to be straight-forward. It's also a portable space that can be moved and set up where needed, but that's not unusual either.    Then focus on how to make sure the fact that the office is also occasionally used for personal quarters and travel and how to make sure the two different usages are clearly delineated and documented.  If you can show a clear dividing line between business time and personal use time, there should be little problem with the deduction.
 

cwh33

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Thanks Linda.  We had found and read 280A but tax law is not the kind of law my wife practices so we just aren't comfortable with our interpretations.  We had seen the Forbes article and actually read the court decision but that was a different situation as when our RV is used for business, it is only for business and clearly so.  When for personal, that is also clear but will be limited to just a few trips each year to visit family as the primary purpose is for business use.  The google link you shared was helpful as it revealed a few articles I had not found and a couple of links to people who focus on this area of tax law so I'm going to reach out to a few of them.

Thanks Gary, no problem.  I agree this seems reasonable.  I just want a CPA or attorney or someone familiar with this situation to agree with me before I move it forward and write off a percentage based on business use.  You are correct it is directly a temporary office use for the business.

Thanks everyone for the help.  I think I've got enough to go on now.
 

Dreamsend

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Just thinking about the other piece of this puzzle.  In order to qualify as a business expense, whatever space one is using as the "business" MUST BE USED 100% exclusively for the business.  I had a home office in my S&B dwelling - a converted bedroom.  I could not use the bed in the room for sleeping, I could not keep clothes in the closet, or have clothes chests for example.  The same is true for your RV.  If you are using only a portion of the RV exclusively for business, then only that percentage of the total space can be a business expense.  Although in the court case, the RV was moving about, it makes no difference if it's stationary.  The rule is 100% with the exception of 14 days for other uses.  In my case, the "office space" could have been used as a guest bedroom for no more than 14 days per year for example.  The IRS has been pretty adamant about this going back as far as 1982 with their court rulings.

Look at it from IRS standpoint, if one could switch back and forth willy-nilly between uses, i.e. office vs. RV for travel, vs. bedroom, vs. a boat, then anyone at any time could set up some bogus business (storing inventory for example in the RV, charging $1 to friends for a fishing cruise, and similar) and claim a write-off.  In order to write-off space in a dwelling as business expense, the use MUST BE 100% for the office, with the 14 day exception. It's not the time of business usage vs. the time of personal usage, it's the SPACE usage that matters.  Your assertion about "primary" use as a business vs. a little time for personal use is not how the IRS sees it.  If one wants a business write off for office space, then the space is to be 100% for business.


Anyway, that's the way I learned it, and as taught by my very experienced, long-time business tax accountant who's dealt with just about every business tax situation you can imagine.  I'd also be cautious about the business "renting" the RV space to you for your travels.  Unless this is the primary service provided by the business (renting space), then the IRS will pretty much see through what you are doing and would likely disallow this. 

Good luck anyway
Linda
 
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