RV Business Expenses

[Bzeitham]

We are looking at working on the road. The question is when we are on the road in a motor home, what all can we write off as business expenses? The cost of travel? The cost of the motor home? Food and campground expenses? We have found what might be the ideal situation for us to travel, make some income to support us. Anyone able to provide any input?

Thanks in advance...

[NYCgrrl]

Bzeitham wrote:
Thanks for all the input. Yes, you are all correct in suggesting a tax pro for this. Also, I feel that forming an LLC for this venture makes sense also. The real reason I asked the question was to determine how much savings we might get by using an RV rather than staying in hotels/motels. First, I like living in our own dirt and clutter...secondly living on the road eating in restaurants is bad for my health. Guess it really does not make a big difference about the tax write off thing because it's really about living the way we want to on the road.

Again, thanks for all the input.

Look carefully into the advantages and disadvantages of the different corporation classifications. When I operated my business at home, LLC, made best sense. I'm now mulling the other types of corporations to see what will give me the better bang for my funds and reduced personal liability insurance costs on the road.

HTH.

Oh and a P.S: What state you incorporate in can make a world of difference. Last time out I incorporated in NY...next time MD is looking good but so is Panama for different reasons.

[NoVa_RT]

The OP doesn't mention any business reason for working on the road, which may suggest that it is just a preference to work while traveling in the RV. Not much will be deductible under that scenario.

[Bzeitham]

Thanks for all the input. Yes, you are all correct in suggesting a tax pro for this. Also, I feel that forming an LLC for this venture makes sense also. The real reason I asked the question was to determine how much savings we might get by using an RV rather than staying in hotels/motels. First, I like living in our own dirt and clutter...secondly living on the road eating in restaurants is bad for my health. Guess it really does not make a big difference about the tax write off thing because it's really about living the way we want to on the road.

Again, thanks for all the input.

[accsys]

WTP-GC wrote:
This position is having the mindset that income belongs first and foremost to the government and not the wage earner.

It's not so much the mindset but the way the law is written. 26 U.S, Code Section 61 starts off -

(a) General definition: Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

[WTP-GC]

troubledwaters wrote:

WTP-GC wrote:
There's been a great number of disputable matters discussed on this thread as related to a tax code that nobody can fully comprehend. However, there has been a predominant, but no less sad position taken by many people who've commented. This position is having the mindset that income belongs first and foremost to the government and not the wage earner.

Before the end of 2017, I will have mailed off more money in direct tax payments to the IRS than most people will make in 2 years income (no penalties or interest involved). So yes, I have a very strong opinion on the matter 😉

If you are mailing off to the IRS more money than I make in two years, then you sir, are very very well off and have no room to complain; you're paying your fair share. On the other hand, a good chunk of what you are mailing off, is probably money you withheld from your employees paychecks, which isn't your money.

Very very well off...NOPE
Paying my fair share...that's always a ridiculous statement
Money withheld from employee's paychecks is paid as you go. None of this is employee related.
Complaining...NOPE, I'm quite fortunate and don't complain

[troubledwaters]

WTP-GC wrote:
There's been a great number of disputable matters discussed on this thread as related to a tax code that nobody can fully comprehend. However, there has been a predominant, but no less sad position taken by many people who've commented. This position is having the mindset that income belongs first and foremost to the government and not the wage earner.

Before the end of 2017, I will have mailed off more money in direct tax payments to the IRS than most people will make in 2 years income (no penalties or interest involved). So yes, I have a very strong opinion on the matter 😉

If you are mailing off to the IRS more money than I make in two years, then you sir, are very very well off and have no room to complain; you're paying your fair share. On the other hand, a good chunk of what you are mailing off, is probably money you withheld from your employees paychecks, which isn't your money.

[WTP-GC]

There's been a great number of disputable matters discussed on this thread as related to a tax code that nobody can fully comprehend. However, there has been a predominant, but no less sad position taken by many people who've commented. This position is having the mindset that income belongs first and foremost to the government and not the wage earner.

Before the end of 2017, I will have mailed off more money in direct tax payments to the IRS than most people will make in 2 years income (no penalties or interest involved). So yes, I have a very strong opinion on the matter 😉

[accsys]

I need another bag of popcorn, this is starting to get good!

[westernrvparkow]

WTP-GC wrote:

westernrvparkowner wrote:
The worry is not that the IRS will audit, disregard the deduction and you will owe the taxes. The worry is the IRS will disregard those deductions (and maybe a few others while they are at it) and you will owe the taxes, penalties and interest. Since they are generally a couple of years behind in audits, those penalties and interest will be several times the amount of back taxes. Then they decide to not only look at the year they are auditing, but they disallow those deductions for all they years they were taken, and that $1000 in taxes will rise to $20,000+ in multiple years of taxes, penalties and interest.
To deduct the depreciation and expenses on an RV, I would need to be on rock solid ground that the RV was NECESSARY for business, not just a convenience. And you would also need to be doubly sure the business was an actual business, not a hobby, and not a business that did not need to be run out of the RV.
I think most people would find the risk vs reward calculation to be in favor of not taking on the risk. The reward is too low.

That's an extremely gross over-exaggeration of the likely scenario being presented by the OP. Though we could not cover every possible scenario, the penalties for late payment and the subsequent interest is actually quite low (for the scale we're discussing here). If the OP took an additional $10K in deductions due to their circumstances and an audit proved that 100% of that was incorrect (not likely to be the case), assuming a 25% tax bracket, that would be roughly $2500 owed in back taxes. Even if it took the IRS 2 years to audit and issue findings, you're not going to owe more than about $2K or so in penalties. Again, assuming that the complete amount of deductions for the travel related expenses is found to be in error.

But as I said, meticulous record keeping is required. In the highly unlikely event you were audited, the burden of proof is on the IRS to show that your deductions are unacceptable. If you use the established federal guidelines for per diem, mileage, and other expenses, you're going to be covered. Or you can demonstrate that your actual deductions are less than those federal allowances.

And you don't have to prove that anything is a "necessity" for business. You only have to show that the item or service (in this case an RV) is used for business. My smartphone and WIFI device and high-dollar workboots and pretty shirts and hats are not a necessity for business, but they sure are used for it and that's good enough. I do wear my work shirts and hats outside of work sometimes, so should I be compelled to accurately report these uses as non-work-related and only take a 93.7% deduction for such...LOL!

Either way, I vehemently disagree that the risk isn't worth the reward. We're not talking about someone who's trying to shave tens of thousands of dollars on their tax bill, but rather probably someone who has limited (or fixed) income just trying to navigate the 75,000 page tax code while ensuring they're being treated fairly.

Unless you are required by your employer to have a uniform, clothing is generally not deductible. You can't buy $5000 suits and write them off. Like I said, it isn't just the one year, it would be if an audit found a deduction to be in error, they would require that deduction also be disallowed for all the tax years it was taken. Even with your example of $1000 in taxes and a couple of thousand in penalties and interest it would easily reach 5 figures with a few years of deductions disallowed. That is a pretty big pill to swallow for most people. And I would venture to say that if the OP was just trying to squeeze a few bucks out of their fixed income tax bill, taking a deduction for RV expenses won't save them very much money at all, but still would leave them open to an expensive and, for most people, stressful audit and settlement.

[MrWizard]

talk to a tax professional

generally its this way, unless you needed to travel for the business (sales appointments, customer service, delivery etc..)
travel expense is NOT a deduction, you have living expenses, stick house or on the road NOT deductible...etc,,

only expenses directly related to business, and business supplies
your phone, your internet, office supplies
the home office thing is even harder to claim in an RV, because its almost impossible to have a dedicated ROOM, that is the office housing everything for work, and not play or living

like i said this is general
you trade the stick house life for the mobile life, but unless you are visiting clients and can convince the IRS that fuel was cheaper than airline fair
you don't get to deduct any RV expenses

we have some members that work from the RV, a few day traders
some IT tech people, engineering consultant, etc..

i think for most the tax write offs are minimal
there was one who was a GOLF sales professional, who traveled a seasonal circuit, he had a special custom conversion, an RV turned into a traveling show room
he is/was the RARE exception

[WTP-GC]

westernrvparkowner wrote:
The worry is not that the IRS will audit, disregard the deduction and you will owe the taxes. The worry is the IRS will disregard those deductions (and maybe a few others while they are at it) and you will owe the taxes, penalties and interest. Since they are generally a couple of years behind in audits, those penalties and interest will be several times the amount of back taxes. Then they decide to not only look at the year they are auditing, but they disallow those deductions for all they years they were taken, and that $1000 in taxes will rise to $20,000+ in multiple years of taxes, penalties and interest.
To deduct the depreciation and expenses on an RV, I would need to be on rock solid ground that the RV was NECESSARY for business, not just a convenience. And you would also need to be doubly sure the business was an actual business, not a hobby, and not a business that did not need to be run out of the RV.
I think most people would find the risk vs reward calculation to be in favor of not taking on the risk. The reward is too low.

That's an extremely gross over-exaggeration of the likely scenario being presented by the OP. Though we could not cover every possible scenario, the penalties for late payment and the subsequent interest is actually quite low (for the scale we're discussing here). If the OP took an additional $10K in deductions due to their circumstances and an audit proved that 100% of that was incorrect (not likely to be the case), assuming a 25% tax bracket, that would be roughly $2500 owed in back taxes. Even if it took the IRS 2 years to audit and issue findings, you're not going to owe more than about $2K or so in penalties. Again, assuming that the complete amount of deductions for the travel related expenses is found to be in error.

But as I said, meticulous record keeping is required. In the highly unlikely event you were audited, the burden of proof is on the IRS to show that your deductions are unacceptable. If you use the established federal guidelines for per diem, mileage, and other expenses, you're going to be covered. Or you can demonstrate that your actual deductions are less than those federal allowances.

And you don't have to prove that anything is a "necessity" for business. You only have to show that the item or service (in this case an RV) is used for business. My smartphone and WIFI device and high-dollar workboots and pretty shirts and hats are not a necessity for business, but they sure are used for it and that's good enough. I do wear my work shirts and hats outside of work sometimes, so should I be compelled to accurately report these uses as non-work-related and only take a 93.7% deduction for such...LOL!

Either way, I vehemently disagree that the risk isn't worth the reward. We're not talking about someone who's trying to shave tens of thousands of dollars on their tax bill, but rather probably someone who has limited (or fixed) income just trying to navigate the 75,000 page tax code while ensuring they're being treated fairly.

[westernrvparkow]

WTP-GC wrote:
Seriously, almost everything is available as a business write-off...if you have a legitimate business (or at least one that remotely resembles a legitimate business). You have to think about the scale of things. For the stuff being discussed by the OP, you going to be doing this to effect of saving several thousand dollars at most?? I like to think about the worst case scenario in the event that your write-offs are scrutinized. In the most extreme case, the IRS will audit you and find out that you owe XXX dollars of taxes based on the "unapproved" write-offs. So the IRS picks you out of tens of thousands and makes you pay back a grand in taxes? And as long as you comply, you won't be in trouble.

However, here's one way I would approach it. I would reimburse myself from the company for every mile driven at the max allowable rate (more for towing). I would also assign per diem at the max rate (based on federal guidelines). Plus direct reimbursement for overnight hotel stays (based on location) is also legitimate. With those 3 factors alone, you can receive tons of tax-free income without even getting a sniff from the IRS.

But, as always, meticulous record keeping is key.

The worry is not that the IRS will audit, disregard the deduction and you will owe the taxes. The worry is the IRS will disregard those deductions (and maybe a few others while they are at it) and you will owe the taxes, penalties and interest. Since they are generally a couple of years behind in audits, those penalties and interest will be several times the amount of back taxes. Then they decide to not only look at the year they are auditing, but they disallow those deductions for all they years they were taken, and that $1000 in taxes will rise to $20,000+ in multiple years of taxes, penalties and interest.
To deduct the depreciation and expenses on an RV, I would need to be on rock solid ground that the RV was NECESSARY for business, not just a convenience. And you would also need to be doubly sure the business was an actual business, not a hobby, and not a business that did not need to be run out of the RV.
I think most people would find the risk vs reward calculation to be in favor of not taking on the risk. The reward is too low.

[mgirardo]

We spend our summer at a seasonal site. I own my own business (no employees) and work out of the house. During the summer, I work out of the Motorhome. I do not deduct any house expense or RV expense. At home, my office is shared by the rest of the family and doesn't meet the requirements set out by the IRS. Since I use either the dinette or a camp chair to work out of while in the Motorhome, I don't think that meets the IRS requirements either.

My understanding of travel expense deductions is only when traveling to and from a customer. If you were traveling to a campground for a customer, you could deduct it. If you were traveling from one campground just because that's where you want to stay, I don't think you can deduct it.

-Michael

[Grit_dog]

And you need to differentiate between employee business expense and business expense if you own the business.
Speaking for employee business expense, there are many caveats as to what is legal to claim and a lot of it hinges on your current tax home and primary residence and the "expected" durations working out of town. IE, if you are just full timing and picking up work wherever it may be, then none of it may be deductible as out of town expenses as you are "home" at night.
On the flip side if you do it right and are in qualifying situations, living out expense tax deductions can be quite lucrative. I've been able to deduct sometimes up to $70-80k a year off my adjusted gross income. All without having to keep a single receipt, but rather just proof of location and durations.

You'll need someone well versed in this. Many tax preparers are clueless about it.