Tax Deduction and question about loans

[mbergen]

I have a couple of questions.

I'm thinking about getting an rv which I'll need a loan for. I read that you can deduct the interest on taxes (in the USA), but it would need a bathroom (toilet). Due to the weight I could pull with my car, many of the models I'm looking at do not have bathrooms - but I saw you can buy a portable toilet for camping - do you think that would count? They all do have cooking and sleeping facilities, the other requirements.

For my second question, from reading another thread, I see that some of the RVs have fairly long waiting periods - 10 - 14 months was the one I'd read for the Scamp. Would you put the deposit down using your own funds, wait until right before they start building it, then get the loan so you knew you'd qualify - I shouldn't have any issue getting the loan but wouldn't want to take chances.

Meg

[steve dunham]

A dwelling unit as legally defined must have permanent living ,sleeping , cooking and sanitation facilities.
Sanitation facilities require a Water Closet , sink and shower or bathtub.
I would talk to a tax professional before I assumed that a small trailer which does not meet the legal definition meets the tax code.

[k corbin]

Originally Posted by mbergen

I have a couple of questions.

I'm thinking about getting an rv which I'll need a loan for. I read that you can deduct the interest on taxes (in the USA), but it would need a bathroom (toilet). Due to the weight I could pull with my car, many of the models I'm looking at do not have bathrooms - but I saw you can buy a portable toilet for camping - do you think that would count? They all do have cooking and sleeping facilities, the other requirements.

For my second question, from reading another thread, I see that some of the RVs have fairly long waiting periods - 10 - 14 months was the one I'd read for the Scamp. Would you put the deposit down using your own funds, wait until right before they start building it, then get the loan so you knew you'd qualify - I shouldn't have any issue getting the loan but wouldn't want to take chances.

Meg

Talk to your local credit unions and see what they have to say.
They can guide you to the best type of loan that is suitable for your needs. Comparison shop, some local credit unions have better rates than others. As to the tax advice, there is a website for that from the IRS with specific publications about the various qualified deductions including sales tax which explains such things. If you can't wrap your head around it then talk to a local tax person who is in a business that can be trusted to keep your personal information confidential.

[Ruban&Martha]

I second Steve's assessment. According to several articles I have read, such as this one, the amenities must be permanently attached for the mortgage interest to be tax deductible. I would take that to mean the toilet either needs to be plumbed, or be a composting toilet.

[John Linck]

Invalid deductions can get you a small fine if you are caught. But with congress laying off most IRS auditors that's unlikely, so go for it. OTOH, hiding income is another matter. Those folks can end up in jail; unless they hire fancy lawyers like the 1% do. They let the rest of us chumps pay for government.

Still, I doubt you are talking much savings by deducting your loan's interest. Like my Pappy use to say, "If you can't afford the rig better stay home".

John

[steve dunham]

[QUOTE=Like my Pappy use to say, "If you can't afford the rig better stay home".

John[/QUOTE]

True words of wisdom , your Pappy is / was a very smart and wise man.
As my Dad use to say you only take out a loan for necessities like a house or a car and never for luxuries that you can live without .

[mbergen]

I don't want to take an invalid deduction - just trying to figure out if it's valid or not, but if it is valid I might as well take it since I already itemize for my regular mortgage. Combined with my home's mortgage, every little bit helps.

I'm leaning towards the scamp which has the toilet, shower, kitchen & sink just for the convenience. You are probably right that its not going to amount to enough of a deduction and so it should probably influence my decision too much.

I could wait 8 years and save up once my regular mortgage is paid off, but that would be 8 fewer years to enjoy it, so I lean towards the RV loan. I do want to save up a good down payment though.

Thanks.

Meg

[cpaharley2008]

It maybe deductible as a second home but you have to claim it separately from your primary home interest since you will receive a form 1098 for your primary residence and IRS matches that number to what the bank files with IRS. Thus it must be separately stated as second home interest just like a home equity loan. Adding the 2 numbers may give rise to computer kicking your return out since it does not match.

[Donna D.]

I wouldn't assume anything when it came to filing and it's the IRS. I wouldn't believe anything I read on any trailer forum or Facebook group either. I'd see a tax accountant. The few bucks consultation charge could save many hours and dollars of headaches if the IRS decides they don't like what you're doing. Ignorance is not a defense and I'd rather be safe than sorry. YMMV.

[Byron Kinnaman]

Donna Dee has the right idea. Even IRS might not know, so a tax consultant would be the best bet.
If you start paying yourself the amount that a would be by the time your trailer was ready you have 12 to 14 months worth paid.

Credit unions in my opinion are the best bet for loan.

[clairemr1]

what donna (post #9) said. when it comes to things like what the IRS will approve, i certainly wouldn't rely on a public rv site for accurate info. get tax advice or call the IRS directly (if you can get anyone to respond from there anymore).

[EricAllyn]

Or check out the use of a home equity loan. Put the extra payment you would be making into you home loan while you wait, then take the home equity loan at the time of delivery. You get the highest "payback" on the interest rate by saving the interest on the home, and then you are set up for the equity loan -- just another idea

[Byron Kinnaman]

Originally Posted by clairemr1

what donna (post #9) said. when it comes to things like what the IRS will approve, i certainly wouldn't rely on a public rv site for accurate info. get tax advice or call the IRS directly (if you can get anyone to respond from there anymore).

Talking directly to the IRS seems like a logical thing to do. However, recent evaluations of the IRS responses to question indicated that even the IRS staff is often wrong. And if you act on their advice there's no protection for you. Consider carefully before taking advice the possible results.

[herons]

I don't believe a loan to buy a recreational vehicle, regardless if it is your full-time residence, would be considered a mortgage. Thus it would not be deductible on your Schedule A as mortgage interest.


mort·gage
ˈmôrɡij/
noun: mortgage; plural noun: mortgages

1. 1.
   a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
   
   
   • a loan obtained through the conveyance of property as security.
     "I put down a hundred thousand in cash and took out a mortgage for the rest"
     
     
   • a deed effecting the conditions of a mortgage.
     
     
   
   
   
   

[mbergen]

I decided I'm not going to worry about getting something I could deduct. I think I'm going to try to stay away from home equity loans - I got one to put siding on my house, but that was increasing the value of the home so it made sense to me, but don't want to risk the home for an RV.

Thanks!

Meg

[thrifty bill]

I always avoid loans on non-essential items that depreciate in value, think boat, RV, motorcycle. This avoidance meant I didn't always have the newest/best toys, and didn't keep up with the neighbors. But then I was able to retire early, while they continue to work. Seems like a reasonable trade to me.

[Jann Todd]

Originally Posted by mbergen

I don't want to take an invalid deduction - just trying to figure out if it's valid or not, but if it is valid I might as well take it since I already itemize for my regular mortgage. Combined with my home's mortgage, every little bit helps.

I'm leaning towards the scamp which has the toilet, shower, kitchen & sink just for the convenience. You are probably right that its not going to amount to enough of a deduction and so it should probably influence my decision too much.

I could wait 8 years and save up once my regular mortgage is paid off, but that would be 8 fewer years to enjoy it, so I lean towards the RV loan. I do want to save up a good down payment though.

Thanks.

Meg

To take the interest from an RV loan off your federal taxes it must qualify as a home or second home. That means it must have sleeping facilities, kitchen facilities and a full bath that is self-contained. You cannot use external items to catch the grey water. We've done this through our tax accountant. For state taxes not sure since each state is different. But the sales taxes can be taken off in many states since it is a vehicle. Colorado is one of them. So it is a vehicle by state law and a home also. Hope this helps. Any money you can deduct saves you money. If your tax level is 15% and you take off $1,000 then you have saved $ 150. This is just an example.

[Raspy]

You definitely should ask a professional.

When you do, explore the ideas of wether it's a primary residence, a rental, a second home or if you use it during the course of business in a way that you cannot use your primary home. The permanently mounted facilities, may not apply and if they do, it's not about being permanently hooked up to city utilities, it's wether your little house has those things installed in it. Like a permanently installed stove, vs. a microwave on the counter. That is how second units on a property are determined to be dwellings or storage units.

If you travel for work, it is definitely a deductible expense. That is, if you are in business, use it for business and stay there during the course of business. Which means the business pays for it and a place to park it; a business expense.

Ask a professional.