Owners of towable RVs—including travel trailers and fifth wheels—can no longer write off the interest on their RV loan as a tax deduction.
In December 2017, the House passed a new tax reform bill that will benefit the growing RV industry. However, the bill modified the definition of motor vehicle by taking out specific references to automobiles, trucks, RVs, and motorcycles. These were replaced with the phrase “any self-propelled vehicle designed for transporting persons or property on a public street, highway, or road,” which technically removed towable RVs from the definition.
The new bill allows deduction of interest on mortgages up to $750,000 for first and second homes, which can include motorized RVs. According to the Recreation Vehicle Industry Association (RVIA), the new bill will also:
- Cut the top corporate tax rate to 21%, beginning with the 2018 tax year.
- Allow all floorplan financing interest charges on motorhomes to continue to be a deductible expense (floorplan interest on towables will be subject to a 30% limitation on interest expenses based on earnings before interest and taxes).
- Lower individual tax bills for 95% of all filers, leaving more money in taxpayers’ hands.
- Lower the tax rates to 20% for qualified business income of certain small businesses that pass on profits to owners and are taxed at individual tax rates.
RVIA said they will be working with the House Ways and Means Committee and the Senate Finance Committee to correct the definition in a technical corrections bill. Until then, if you’re thinking about buying a towable RV, keep in mind you won’t be able to deduct the interest on your loan. If you have a fifth wheel or travel trailer and already deduct the interest on your loan, contact an accountant to learn more about how this new law will affect you.
Source: Recreation Vehicle Industry Association: Tax Reform Bill Will Benefit The RV Industry