In the world of housing and shelter, the recreational vehicle can qualify for the mortgage interest deduction as a second home.
According to the IRS, all “second homes” must be used as security of the loan and must have basic sleeping, cooking and toilet accommodations. Virtually all RV types – motorhomes, van campers, travel trailers, truck campers and even some folding camping trailers – are so equipped.
In a capsule, an RV combines transportation and temporary living quarters for travel, recreation and camping. The two main categories are motor homes (motorized) and towables (towed behind the family car, van or pickup). Types of towable RVs are folding camping trailers, truck campers, conventional travel trailers and fifth-wheel travel trailers.
Lenders view RV buyers as reliable borrowers. Fewer than 2 percent of all RV loans are delinquent, the RVIA says, sparking lenders to extend RV loan terms and thus making monthly payments more affordable.
Loan terms for new, large RVs typically range from 10 to 12 years, with some lenders willing to extend to 20 years. While many dealers offer their own in-house financing, RV loans can be obtained from credit unions, banks, savings and loans and finance companies. According to the RVIA, a majority of RV lenders require less than a 20 percent down payment and some are willing to accept less than 10 percent down.
Mortgage interest is deductible on federal income tax on two homes. Although mortgage interest is not a dollar-for-dollar tax credit, it does reduce taxable income.
The IRS publishes two booklets that contain helpful information regarding the tax deductibility of loan interest. Copies of “Publication 936 – Home Interest Deduction” and “Publication 523 – Selling Your Home” are available by calling the IRS at (800) 829-3676.
And there can be an investment side to an RV purchase. Depending upon time of year and area, dealers and rental outlets generally charge between $100 and $2,500 a day for motor homes and from $80 to $150 a day for truck campers and travel trailers. Individuals who rent their units personally typically charge less.
According to Richard Morse, attorney and tax-deferred exchange specialist, RVs can be exchanged much like rental homes in a Section 1031 exchange. However, rental homes are real property and recreational vehicles are personal property.
“You certainly can do personal property exchanges,” Morse said. “The timelines are the same, but personal property exchanges are much more stringent. You must trade an RV for an RV, a truck for a truck.”
