Towable RV owners lose tax benefit with new tax bill (Fifth Wheels, Travel Trailers)

[HelloFreedom]

We're planning on upgrading our Fifth Wheel in the next year or two. According to an article from 12/22/2017 at https://rvtravel.com/towable-rv-owners-lose-benefit-new-tax-bill/ the new Tax Bill only allows Motorcoach owners to deduct the interest on their RV loan, not towables.

The new tax will allow a deduction of interest on mortgages up to $750,000, for purchases of first and second homes, which can include RVs, but only motorized ones.

The new law only allows deduction for “any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road,” which does not include towable RVs such as travel trailers and fifth wheels.

RVIA says it will work with the House Ways and Means Committee and the Senate Finance Committee to include a change to the definition in a technical corrections bill which will likely be needed next year as other oversights and unintended consequences become known.

But, for now, if buying a towable RV is in your plans, don’t count on taking a tax deduction on the loan interest. If you already own a towable RV and have been deducting the interest, contact your tax professional to learn how this applies to you. 

I can't imagine that companies from states like Indiana whose economies are more RV-based won't be very involved in eliminating this hole in the tax code.

I'm looking forward to hearing Jim Koca, Escapees Advocacy Director, report on this legislation and any fixes upcoming.

PLEASE NO PARTISAN POLITICAL REMARKS. NO REASON FOR THAT. THIS IS JUST A LEGISLATIVE ISSUE THAT I WANTED TO CHECK BACK ON TO IF ANY PROGRESS IS MADE.

 

 

[trailertraveler]

With the doubling of the standard deduction, I wonder how much of an impact there will be  on travel trailer owners as travel trailers tend to be at the lower end of RV prices. Being retired and not having a first mortgage anymore, we haven't been anywhere close to exceeding the standard deduction under the old rules for years. The standard advice on this forum seems to be to enter the RV lifestyle debt free so those that follow that advice would not have interest payments to deduct now or with the new tax rules. Those that are paying property taxes, mortgage interest on a sticks & bricks, state income tax, have significant medical/insurance expenses (above the percentage of income limit) and have a sizable loan on a towable RV may take a hit on the new limits to deductions.  

[Ray,IN]

As I understand the tax code, you may only deduct home interest if you file the long form, that is only possible if you meet the medical deduction minimum first. That was the old rules, no-one knows all the new rules yet, or how they will be implemented. The sky isn't falling yet.

[whj469]

As noted above, not many of us will be itemizing because of the increased standard deduction. I have not been able to itemize for many years. I live in a low tax state and I don't owe anyone that I would pay interest on. Good Luck

[GlennWest]

Actually we have itemized for many years. Have lots of deductions traveling for work as I do. 

[Chalkie]

18 hours ago, Ray,IN said:

As I understand the tax code, you may only deduct home interest if you file the long form, that is only possible if you meet the medical deduction minimum first. That was the old rules, no-one knows all the new rules yet, or how they will be implemented. The sky isn't falling yet.

I don't believe this is true as regards what it takes to file long form. We have taken the mortgage deduction for both our S&B and 5th wheel which does as you point out require the long form. As a military retiree on Medicare and Tricare for Life we have never (and likely never will) been able to claim a medical deduction.

I will be following this topic as we do have the 5er vice a motorhome. Once the dust settles on all the minutia of the bill some bright somebody out there will start running some "what if" calculations to see what the impact it really going to be.

[remoandiris]

Meh.  Despite owning a S&B and buying a new 5er, I have never had enough deductions to make itemizing more beneficial than taking the standard deduction.  And since the standard will double in 2018, I am more than a little certain I'll pay less in federal taxes.

[Barbaraok]

Only the first year out did we have enough to itemize, since then it is the standard deduction.  

[Kirk W]

On 12/23/2017 at 1:13 PM, Ray,IN said:

if you file the long form, that is only possible if you meet the medical deduction minimum first.

This is not correct. What you do need is a total of deductions that exceed the amount of your standard deduction. The medical deductions must total 7.5% of your income to be deductible and the total deductions need to exceed the standard one. The law would allow you to file long form and claim your deductions even if they don't exceed the standard, but since that would mean that you pay more tax by doing so, most of us choose not to do that. 

[Ray,IN]

11 hours ago, Kirk Wood said:

This is not correct. What you do need is a total of deductions that exceed the amount of your standard deduction. The medical deductions must total 7.5% of your income to be deductible and the total deductions need to exceed the standard one. The law would allow you to file long form and claim your deductions even if they don't exceed the standard, but since that would mean that you pay more tax by doing so, most of us choose not to do that. 

Yes, I know that's correct. What I said isn't what I was thinking. It's doable but only for an exceptionally few filers. I'd guess 98% of us could not come up with enough deductions to overcome the lack of 7.5% medical deductions.

[packnrat]

well if "towables" get hurt like this, then to sell them the dealers are going to drop the prices by thousands of dollars.

 

why this country must get back on the gold standard, (aka real US dollars -no fed reserve notes-- and backed by gold).

as well as only taxing imports, not a mans (woman's) sweat.

[trailertraveler]

I decided to crunch a few numbers and see what this might really mean in light of the doubling of the standard deduction to $12K for an individual and $24K for a couple.

According to an internet search,  most RV loan rates are currently between 4-6% depending on the amount and term. Many even new travel trailers are less than $50K. First year interest on a $50K loan would be $2000-3000. In comparison, the interest on a $350K loan for a custom 5th wheel like a New Horizon would be $21K at 6%.

I don't know if the new rules allow for deduction of sales tax instead of state and local income taxes, but have read that the local tax deduction is limited to $10K. This could potentially affect all buyers of high end RVs in non-income tax states. Might cause a boom for the LLC business.

[Kirk W]

16 hours ago, Ray,IN said:

What I said isn't what I was thinking.

That seems to happen to a lot of us "very experienced" people. (Very experienced sounds way better than old! )

[Kirk W]

14 hours ago, packnrat said:

well if "towables" get hurt like this, then to sell them the dealers are going to drop the prices by thousands of dollars.

I'll be waiting to see that one happen! It will be nice if that happens. 

[GeorgiaHybrid]

On ‎12‎/‎25‎/‎2017 at 12:44 PM, Kirk Wood said:

This is not correct. What you do need is a total of deductions that exceed the amount of your standard deduction. The medical deductions must total 7.5% of your income to be deductible and the total deductions need to exceed the standard one. The law would allow you to file long form and claim your deductions even if they don't exceed the standard, but since that would mean that you pay more tax by doing so, most of us choose not to do that. 

Kirk,

There are some of us that are required to fill out the long form whether or not our deductions exceed the standard. Some circumstances that force you to file that form are having self employment income or if you have sold property during the year as well as the amount of income you have.

[BlueLghtning]

2 hours ago, GeorgiaHybrid said:

Kirk,

There are some of us that are required to fill out the long form whether or not our deductions exceed the standard. Some circumstances that force you to file that form are having self employment income or if you have sold property during the year as well as the amount of income you have.

I used to be based out of an AL office for work, but lived in GA,  My paycheck had AL taxes taken out of it, and at tax time I would get a credit from GA for the taxes I had paid to AL, however GA taxes were higher than AL, so I always owed GA and got money back from AL. I always had to file long form in this scenario and there were some years the standard deduction looked better from a federal tax point of view, but then I couldn't claim the taxes I paid into AL to get a credit for in GA. If you did the math, which I always did, I still came out better itemizing even if my federal deduction was less because in the end the money owed to GA would have totally cancelled out any extra I got from the feds.

Interesting enough for many years my end tax result was almost a total wash between what I owed and what I got back. I think one year I was maybe $57/to the positive which isn't a bad way to end the year. It meant I kept most of my money in my pocket all year and didn't give the feds a tax free loan for the year. 

Without a house mortage and interest to deduct and very little medical to claim, I'm looking forward to taking the standard deduction this year for the first time in many years!  

[bigjim]

.And stuff like that will still apply in the future B.L.  for many people. The bs about filing on a post card was just that, bs. There are too many variables to make filing that simple for even nearly everyone.

[Dp26]

There are too many powerful people in the tax management business for tax processing to be simple.

[HelloFreedom]

It sounds like with the doubling of the standard deduction and/or a "fix" in the code (if that happens) this may be a non-issue in the long run.

I am VERY impressed with all the people posting here. No partisan political comments, just constructive opinions on navigating through this new issue. Escapees is a special group.

[docj]

On 12/28/2017 at 8:35 AM, HelloFreedom said:

It sounds like with the doubling of the standard deduction and/or a "fix" in the code (if that happens) this may be a non-issue in the long run.

One thing that seems to be omitted from most discussions I've seen about the new tax law is that the ~$4k/person personal exemption has been eliminated.  So if you were a couple who used to take the ~$12k standard deduction you also were able to claim ~$8k in exemptions in addition.  But now, instead, you'll just be able to claim the $24k standard deduction (plus ~$2.k if you're both >65).  So, in reality, you haven't gained all that much.

OTOH, if you used to itemize deductions you could claim them and still be able to deduct the exemptions.  For example, for 2017 I'll have ~$23k in itemized deductions plus the $8k in exemptions.  But for 2018 and beyond, even if I manage to get my deductions over $24k I would no longer have the exemptions to add to that total.

Yes, the overall tax rates have also been decreased by a couple of percent, so on ~$75k of taxable income you'll save ~$2.8k by my calculations, but depending on your circumstances this may or may not be offset by the loss of the personal exemption.

There's no political motivation in this post, just an effort to explain the facts as I understand them to be.

[Dp26]

I make a living dealing with taxes. Change, any change, ensures employment for as long as I desire.

Government costs a certain amount to run, increasing each year. Taxes and debt pays for it.

Shifting and altering income tax does not alter the actual bill to run government, just where we pay from. Some may see a short term pocket increase, but like with every reform, we will all end up paying later... more, not less, unless we actually see a time when government cuts real spending.

Some states will get a nice tax increase with federal withholding offsets being less. None of those states, yet, have decided to forego that increase, just like they have not in past years.

As one not so quality filter company said, "pay me now, or pay me later".

 

 

[Kirk W]

21 hours ago, Dp26 said:

Shifting and altering income tax does not alter the actual bill to run government, just where we pay from. Some may see a short term pocket increase, but like with every reform, we will all end up paying later... more, not less, unless we actually see a time when government cuts real spending.

That is probably the only certain statement of the entire issue. There is a very large share of the population which paid no federal income tax previously and it looks to me like that isn't going to change. Pew Research Center says:

Quote

By contrast, taxpayers with incomes below $30,000 filed nearly 44% of all returns but paid just 1.4% of all federal income tax – in fact, two-thirds of the nearly 66 million returns filed by people in that lowest income tier owed no tax at all. (The IRS tax data used here are estimates based on a stratified probability sample of all returns.)

 

While it doesn't say so, I suspect that the $30k level is based on adjusted gross income, I also suspect that more than a few of us who participate here are in that group who pay no federal income tax. 

[docj]

29 minutes ago, Kirk Wood said:

While it doesn't say so, I suspect that the $30k level is based on adjusted gross income, I also suspect that more than a few of us who participate here are in that group who pay no federal income tax. 

But don't forget that even though we don't pay income tax, if we are employed by someone or as work as an independent contractors we still have to pay FICA or self-employment tax. For many lower income people, this is their primary tax burden.  I realize it's not an "income tax" but TurboTax lets me know I need to pay it to IRS by April 15!

[Dp26]

Everything we buy and sell includes enough to cover taxes, charge card fees, fraud, discounts to others, etc. We all pay on some form.

[mkc]

On 12/29/2017 at 10:19 AM, docj said:

One thing that seems to be omitted from most discussions I've seen about the new tax law is that the ~$4k/person personal exemption has been eliminated.  So if you were a couple who used to take the ~$12k standard deduction you also were able to claim ~$8k in exemptions in addition.  But now, instead, you'll just be able to claim the $24k standard deduction (plus ~$2.k if you're both >65).  So, in reality, you haven't gained all that much.

Yes, the overall tax rates have also been decreased by a couple of percent, so on ~$75k of taxable income you'll save ~$2.8k by my calculations, but depending on your circumstances this may or may not be offset by the loss of the personal exemption.

Excellent point.  If you look at the overall "deduction from income" of personal exemption plus standard deduction for 2017 and prior to the standard deduction only of 2018, singles and couples who don't itemize will basically see a 15% increase in "deduction from income".  Those who have been able to itemize will likely see a smaller % increase (and potentially a decrease if there are multiple dependents and/or they are affected by the SALT cap) in "deduction from income" with the upcoming changes.