Anybody here deduct their RV and related travel expenses off their taxes?

[ReferralMan]

Hi all...

 

I apologize for the intrusion, but I couldn't find any good information on the internet that could provide me with any answers regarding business use of an RV. Most sites I came across had to do with using an RV as a second home, or for living in while working for an employer in a stationary location. I plan to use an RV as a tool for my business for travel and advertising. I came across this site during my research, and by all appearances seems to be a place that can hopefully provide me with some answers to my questions. I'm hoping there are a few of you here that use your RV's for business purposes, and can inform me on some of the do's and dont's of what I need to do to make the tax man happy.

 

I currently own an internet company (NAICS code: 519130) and have been in busines since 1999. I provide services to both consumers and businesses. I have over 20,000 clients and have never personally met any of them. I'm thinking it's about time I start meeting my current clientele (in addition to meeting new ones), thus the reason for my wanting to purchase an RV for my business. I hate hotels, I hate eating out, I hate flying commerically, and I hate unfamiliarity... so the only logical choice in my opinion for taking my business on the road would be an RV.

 

Tenatively, my plans are to start out small to more or less test the waters, and to see if using an RV as a business tool would be a worthwhile and profitable venture. My plans are to purchase a 2016 Dodge Ram 3500 and a 2016 Keystone Raptor 5th wheel to start off with. Both units will be factory ordered to my specs and will be wrapped with my company graphics upon delivery. My reasoning for going with a 5th wheel, is because in my opinion they offer the most bang for the buck. I figure once I reach my desitination points, I can un-hook and either use the P/U, the Harley, or the UTV (depending on the local laws) for transportation to call on my clients and make new sales.

 

I guess my questions would be to anybody that's in a similar situation, is how did you initially expense your RV purchase? Did you do a Sec. 179, or did you go with regular depreciation? If regular depreciation, how long is your amortization period. How detailed are the records you keep, and how do you account for any "personal use"? Do you deduct your actual park expenses, or do you take the standard lodging per diem? Same with meals... actual expenses or the daily per diem?

 

Since the IRS requires a business domicile, I'll still be keeping my home and office here in AZ as my main base of operations. I plan on being on the road at least 6 months out of the year, so I definitely won't be a "full-timer". When I'm home, the RV and P/U will be in covered storage, and will only be used a few days or weekends here and there to promote my business locally.

 

I guess that's enough blather for now. Any and all comments, tips, tricks, or advice regarding my circumstances would be very much appreciated. Thank you in advance...

 

Gary Mell

 

 

 

[TXiceman]

Your best answers will come from a tax accountant. They can review you special circumstances to evaluate your tax position.

 

Welcome to the Escapees forum.

 

Ken

[mickhoss]

I have to agree with ken, talk to your accountant and maybe get second opinion from from another, some accountants are more creative than others.

 

mick

[ReferralMan]

Your best answers will come from a tax accountant. They can review you special circumstances to evaluate your tax position.

 

 

I have to agree with ken, talk to your accountant and maybe get second opinion from from another, some accountants are more creative than others.

 

Funny you guys should make those suggestions... I already talked to my accountant along with a couple other of my buddies accountants. They all pretty much suggested I talk to somebody who's in a same or similar business as I'm in who uses an RV for business purposes, and solicit their feedback on how their taxes are handled. Thus the reason why I'm here asking.

 

Just an FYI... I played hell educating my current accountant on how my internet business works. He had a hard time believing that for as little as a $5k investment that I could pull down six figures a year with practically zero expenses. I'm pretty sure he thought I was a drug dealer. I also had to educate him on a solo 401k, as he nor his accountant buddies have ever heard of such a thing. They now all know what a solo 401k is, and are using the rule for themselves, as well as encouraging their small business clients to set them up also.

 

Contrary to popular belief... accountants don't know everything.

[pugsly]

As others have said, consult with an accountant about your specific situation. I travel several times a year - a combination of attending meetings, teaching seminars, networking, and evaluating the performance of the vehicles we and others develop. Every piece of my travel is a business expense.

 

A difference may be that I have a brick and mortar business that it ties back to, but that seems to matter less and less these days.

[ReferralMan]

I travel several times a year - a combination of attending meetings, teaching seminars, networking, and evaluating the performance of the vehicles we and others develop. Every piece of my travel is a business expense..

 

Cool... now we're getting somewhere.

 

Did you purchase your RV strictly for business purposes, and if so, do you depreciate it as a business asset? If you depreciate, what is your RV type, and what is your depreciation period?

 

When you travel, do you take the lodging and meal per diums, or do you deduct your actual expenses?

 

Thanks...

[rynosback]

 

 

 

Funny you guys should make those suggestions... I already talked to my accountant along with a couple other of my buddies accountants. They all pretty much suggested I talk to somebody who's in a same or similar business as I'm in who uses an RV for business purposes, and solicit their feedback on how their taxes are handled. Thus the reason why I'm here asking.

 

Just an FYI... I played hell educating my current accountant on how my internet business works. He had a hard time believing that for as little as a $5k investment that I could pull down six figures a year with practically zero expenses. I'm pretty sure he thought I was a drug dealer. I also had to educate him on a solo 401k, as he nor his accountant buddies have ever heard of such a thing. They now all know what a solo 401k is, and are using the rule for themselves, as well as encouraging their small business clients to set them up also.

 

Contrary to popular belief... accountants don't know everything.

 

Looks like you have your answer then. Find an accountant. that knows the law and what they are doing.

[RV_]

I did and legally wrote off much of my expenses. I pay good money for good tax people. What I learned was in 1997, so it's all obsolete. My biz was a sales biz and I was told I would need to comply with the tax rules of each state I did biz in. I finally ran down a biz lawyer in Dallas who specializes in multi state marketing. That is what you need, an interstate commerce accountant or law firm. It's been 18 years and that's all I recall. I dropped the biz as I didn't need the money anyway.

[ReferralMan]

Find an accountant. that knows the law and what they are doing.

 

Thanks for the information, but I'd rather find somebody that's actually using their RV as a business asset and ask them personally. I kinda like the idea of getting something straight from the horses mouth. As I previously stated, accountants don't know everything, and I'm not about to waste my time looking for that 1 in 10,000 accountant that might actually know something about my business and how it operates. I've got my current accountant trained pretty well, however he wants to get some feedback from somebody that's using the same NAICS code and actually doing what I am proposing before we head in that direction. That's why I'm on here, hopefully somebody here is doing something similar and can offer me some feedback and possibly refer me to their accountant for the straight scoop.

 

 

I did and legally wrote off much of my expenses.

 

Did you actually expense your RV as a business asset? If so, did you do a sec. 179 and what was your depreciation schedule?

[RV_]

It's been 18 years and that's all I recall. I dropped the biz as I didn't need the money anyway. My accountant from then has died and we are on our second tax person since. Sorry.

[Kirk W]

Welcome to the Escapee forums.

 

We do have several members who live in an RV and travel all of the time, while operating a business that provides their total income. If there are any members here who own an RV that is used part time and exclusively for business, I'm not aware of it. The key to doing what you wish to legally is in the use of it. By IRS ruling, you must use the RV for and associated expenses totally for business in order for the costs to be deductible and if you travel on business, but take time out to visit a local national park or any other recreational activity, that makes the expenses of travel not deductible. I will quote from an article in BankRate:

 

Rolling deductions
Regardless of the legal type of company you operate, let us now consider the use of the recreational vehicle for business expenses.

If the RV is used exclusively for business, then you may deduct all expenses associated with its upkeep, maintenance, travel and storage, as well as depreciation, interest on any associated loan and vehicle taxes.

If, on the other hand, you use the motor home for personal as well as business matters, then you may have a problem. In this case, to deduct the business-related travel you should have maintained a daily log on the mileage and use of the vehicle. This log would differentiate between its use for business purposes or personal travel. A very detailed description of deductible business expenses can be found in IRS Publication 535, Business Expenses.

It seems to me that you need to be doing some heavy reading first an so I suggest that you start by downloading a copy of IRS 463 as well as your own copy of IRS 535. With the amount of money that you are considering writing off as well as the size of income you wish to protect, I suggest that you would be much better served to see a tax attorney rather than getting advice from a bunch of amateur experts, like us. While I do have some accounting education and I have read a lot of IRS publications related to RV expenses, you need the assistance of someone who will be there to stand beside you if you should be called in for an audit by the IRS or taken to court over your activities. I doubt that you will find anyone here who is willing to do that!

 

Years ago I had a good friend who was by profession an IRS investigator. He used to tell folks who asked questions like yours, also seeking free advice, "You can deduct absolutely anything that you wish to from your tax return. The problem that you have is not being able to deduct an item but the ability to defend the deduction in an audit or in court."

[docj]

I'm surprised no one has mentioned this relatively recent case in Tax Court which has been widely cited on RV forums:

 

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

 

The case is a good guide as to how much deductibility you can reasonably expect for your RV and related expenses.

[RV_]

Thanks Joel,

Good info.

 

ReferralMan,

I fully understand what you are asking and hope someone comes along who might offer the personal experience you desire. I remember my frustration in trying to find the answer in 1997 before there were any RV forums I knew about. My local tax person gave me the same "best of my limited experience" honest appraisal yours did. I never found another with a similar biz to commiserate with on the fulltime business taxes and experience.

 

Good luck in your endeavors.

 

Safe and prosperous travels!

[Vladimir]

 

Years ago I had a good friend who was by profession an IRS investigator. He used to tell folks who asked questions like yours, also seeking free advice, "You can deduct absolutely anything that you wish to from your tax return. The problem that you have is not being able to deduct an item but the ability to defend the deduction in an audit or in court."

 

In my first professional job, my boss told me to NEVER lie or fudge on income declarations on your taxes. That he said..."was tax evasion" and would get you tossed in a Federal jail fairly quickly. He then followed up with...."Deductions are a matter of interpretation".

 

I remember years ago doing my taxes on April 14th and doing the child care credit. As I worked it through noticed I was taking a double deduction. So I called the IRS hot line and asked for help. Yep, was the first response your doing it right and you are getting a double deduction. I asked to talk to their Supervisor and she came to the exact same conclusion. It seems that when I walked them through the steps and my thoughts they BOTH agreed with me. A couple of years later I noticed that my interpretation could be taken two ways. One lead to one deduction and the other to double deductions. I did write down both names for documentation.

 

The tax code is so complex it is impossible to really understand it.

 

That said, it is really a fairly simple process to divide business expenses and personal expenses. Just ignore the tax code, and try doing that. I disagree with the Forbes article that watching TV negates the business use of the RV. I took a LOT of business trips in my career. IF the overnight accomodations had TV, I probably turned it on! My employer still took the expense deduction. So in the Forbes example, watching TV in your RV at a "selling" event is no different than watching TV in a motel room on a business trip.

 

I have paid as a business expense: $100 dollars for a ride while hitchhiking. Yep, I was working in the backcountry and decided rather than taking a 30 mile hike back to the truck I hiked five miles to the nearest road. After an hour of standing by the one lane road with my thumb out for a couple of hours I flagged down the next vehicle. I told her I was working and needed a ride back to my car. Here is a $100 bucks for the ride. She agreed and after driving me for an hour did not want to accept the money. I told "its a business expense take it and thanks for the ride...it was costing the company MORE money to pay my salary standing by the side of the road!!". When I turned in my expense account everybody just laughed and said....."hey, that's pretty creative".

 

The first test is to be fair. Is this a personal expense or a business expense? In most economic analysis the process is to do a with and without analysis. So an activity was be analyzed with it taking place and without it taking place. I would do the same for business versus personal expenses. Recreate the same trip without the RV. That is a good guideline to what to claim as a business expense. For traveling down the road, take the mileage and time from one business meeting to the next. Then add in your business hours working between those two points. The rest is personal use.

 

In your case, I would end to deduct all the days and mileage when you meet with your clients. Documentation is critical for that. After a month, call the IRS and talk to somebody if your interpretation is correct. Write down their name and document the phone call. Then let your accountant worry about percentages and depreciation rates.

[DuffMan]

You can disagree with the Forbes article author all you want re watching TV being fatal to the business use designation, however that statement was not from the author of the article - It was a direct quote from the Tax Court.

 

Go ahead and play games, but at $300/hr for a cheap accountant or attorney to defend you - It's a loosing battle. Enjoy the mileage and other business deductions and avoid the headache.

[usaperuvian]

Gone with the Wynn's do business in their RV and so do Techomania. You may want to google them and ask for their accountants name to get the best RV/Business Adventure advise.

[ronmon]

There may be another important consideration to research.... and that is the use of an RV in a commercial business. A year or so ago there was a thread about DOT rules applicable to this situation. DOT registration, physical exams etc.. An RVer was stopped by a state trooper who asked "where are you headed" and the reply was "to see a client". This encounter ultimately led to big fines.

I'm certainly no expert but sure worth looking into!

Ron

[GlennWest]

I work full time and full time rv. We do deduct mileage and park rent space, meals, laundry, tools, etc. You have to have a residence primary and your coach second home. This is only way I am aware you can legally do this. When we sold our place in NC we purchased developed land in Huntsville and established residence. This qualified us for deductions. The "second home" is the key. Hope this helps some.

[Kirk W]

The purpose of our court system is to determine what is proper under the law and to interpret the intent of the law. At no point is the determination of what is fair or unfair a function of our system of courts. A great deal of the determination of fair stems from the view of the persons making the determination. Our life's experiences play a major part in what we each believe to be fair, while laws are intended to be more fixed & objective. Tax laws have become extremely complex for many reasons but a chief one is the way that Congress has used tax laws to influence the behavior of the voters. An excellent example of that is the deductability of the interest on a home loan. The reason for that was to stimulate buying of homes and thus the entire economy because a home purchase usually means a chain of purchases to outfit that home. Since budgetary needs must still be met, each deduction must be matched with some other source of tax revenue. Add to that the difficulty of a Congress-member gaining re-election if he/she supports the discontinuing of a deduction that impacts many voters and you find them looking for some way to increase revenues which the voters will not be aware of. The result is the incredible mess that we live with today.

 

Joel, thanks for posting the link to that story in Forbes. While I did read it back when it was published, my memory is not as reliable as I'd like it to be! In my opinion, that is some of the best advice that is in the entire thread.

[rynosback]

You can disagree with the Forbes article author all you want re watching TV being fatal to the business use designation, however that statement was not from the author of the article - It was a direct quote from the Tax Court.

 

Go ahead and play games, but at $300/hr for a cheap accountant or attorney to defend you - It's a loosing battle. Enjoy the mileage and other business deductions and avoid the headache.

I agree and that is what I was trying to convey by my first post. Some one may have ideas, but if they are in a different state or heck even different county with in that state. The laws can be different. So how someone does it in one state, does not mean that you can do it that way in another state. Seek expert professional advice.

[Daveh]

I was an attorney but not a tax attorney. Still, I can tell you Kirk is giving some great advice. Also, (1) you need a formal opinion letter from a tax attorney for something so unsettled and significant (2) it doesnt matter what other people do unless they have been formally audited on the issue and/or had the issue in front of a tax tribunal---otherwise---so what and (3) the tax court decision sounds wrong (not to mention very harsh), and factually distinguishable from what you are proposing, BUT right now that is the law which means you need to be completely prepared to win in tax court or higher to overide or distinguish that case. Technomadia or the Wynn's may give you some starting points but you should get a written opinion from a tax attorney that fully understands your specific situation. If you are in a position where you are telling your tax professional what, or how to, do things; then you do not have a tax professional. How would you like to face a judge as in the Forbes case and tell him you took a major business deduction based upon opinions received in an online forum or from an everyday accountant that you normally instruct how to handle tax mattters? Bad Plan.

[ReferralMan]

I'm surprised no one has mentioned this relatively recent case in Tax Court which has been widely cited on RV forums:

 

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

 

The case is a good guide as to how much deductibility you can reasonably expect for your RV and related expenses.

 

In doing my research, here's a few things that I've learned from the Jackson's mistakes, along with the many other similar cases that ended up in tax court regarding the use of an RV for business purposes. Much of this is just plain ole' common sense.

 

1. Keep meticulous records. This should be a no-brainer!

 

2. If you're going to use an RV for business, then keep it that way and don't use it for any personal use. No matter even if it's just for one day. Virtually all the tax cases I researched mentioned dubious amounts of personal usage. One guy was so obvious, that his travels only included the areas where his children lived, then on top of that he had the gall to bill his client for all of his expenses.

 

3. Paint or wrap your RV (or in my case P/U and 5th wheel) in your company graphics. No measly banners, or magnetic stickers. You want a traveling billboard that's highly visible to your clients. Not only is this an advertising expense, but it shows your intent to actively promote and market your business.

 

4. If you're a full-timer, forget expensing or depreciating your RV. Not going to happen. The tax man wants to see that you have an established base of operations for your business. Unfortunately a mailbox or mail forwarding service is not going to cut it. You need office rental receipts, or if working from a home office, your mortgage interest or property tax receipts to establish your domicile.

 

5. The RV should be purchased through your company or business account via either cash or business loan. You will also want to insure it as a commercial vehicle in your company name.

 

6. Don't rent out your RV and try to write it off as a business expense if you still use it for personal use. You become major audit bait if you try to play that game. Many of the cases that end up in the tax court regarding business use of RVs, are majorly based on these types of schemes.

 

7. For depreciation or Sec. 179 expensing, your RV would be classified as a transient lodging facility for tax purposes, and any stays should be no longer than 30 days before returning to your home base.

 

There's a few other things here and there that I can't think of off the top of my head, but for the most part what I mentioned are things the tax man likes to see. I didn't mean to open up a can of worms or anything, I was just wondering if there was anybody here that was depreciating out their RV for business purposes. I guess not.

 

I appreciate all the responses...

[ReferralMan]

If you are in a position where you are telling your tax professional what, or how to, do things; then you do not have a tax professional. How would you like to face a judge as in the Forbes case and tell him you took a major business deduction based upon opinions received in an online forum or from an everyday accountant that you normally instruct how to handle tax mattters? Bad Plan.

 

I've already been audited twice. I represented myself both times. Contrary to what the government would like for people to believe... it's not that scary. In fact, both times were no big deal. I was nailed for a few bucks the first time, we got it all worked it out and I moved on. The second time they just wanted to know all about my internet business and how they should classify it. They couldn't believe that a business could have a 95% profit margin. Now you understand the reason for wanting as many write-offs as I can get.

 

FYI... I do all my own taxes. It's not rocket science, at least for me anyways. I have an accountant on retainer just to make sure everything is kosher. If I miss something he'll point it out. Many times I end up educating him on issues that pertain to my business and others, so he'll pass that along to his clients. I scratch his back, he scratches mine.

[Kirk W]

I've already been audited twice. I represented myself both times. Contrary to what the government would like for people to believe... it's not that scary. In fact, both times were no big deal. I was nailed for a few bucks the first time, we got it all worked it out and I moved on. The second time they just wanted to know all about my internet business and how they should classify it. They couldn't believe that a business could have a 95% profit margin. Now you understand the reason for wanting as many write-offs as I can get.

Your responses have left me wondering why you ask the questions? It sounds as though you already have more experience in these matters than any of us. I'm not so sure that there is much we could tell you that would be helpful...

[DuffMan]

I currently own an internet company (NAICS code: 519130) and have been in busines since 1999. I provide services to both consumers and businesses. I have over 20,000 clients and have never personally met any of them

 

 

Tenatively, my plans are to start out small to more or less test the waters, and to see if using an RV as a business tool would be a worthwhile and profitable venture.

 

The second time they just wanted to know all about my internet business and how they should classify it. They couldn't believe that a business could have a 95% profit margin. Now you understand the reason for wanting as many write-offs as I can get.

 

Just an FYI... I played hell educating my current accountant on how my internet business works. He had a hard time believing that for as little as a $5k investment that I could pull down six figures a year with practically zero expenses. I'm pretty sure he thought I was a drug dealer. I also had to educate him on a solo 401k, as he nor his accountant buddies have ever heard of such a thing. They now all know what a solo 401k is, and are using the rule for themselves, as well as encouraging their small business clients to set them up also.

 

 

 

Methinks he is harvesting new clients interest - Readers of this forum are not kind to posters that advertise to openly.