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Old 05-09-2016, 11:42 AM   #1
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Tax deduction Loan type

So over the weekend we ordered a 2017 Freedom Elite RV. We were told that in order to deduct the interest like its a second house we would need a special loan type. Is this True? I have never financed a RV before. The credit union we normally use for cars and boats finances cars, boats, rv's all the same way as a auto loan. My accountant (turbo tax ) says I can deduct the interest but doesn't say what type of loan it needs to be.

Thanks in advance.
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Old 05-09-2016, 12:01 PM   #2
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I'm not an accountant or tax professional but, as far as I know, the type of loan does not matter so long as the loan is secured with the RV. For example, buying it with a credit card or signature loan won't work. The RV needs to be the collateral for the loan.
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Old 05-09-2016, 12:02 PM   #3
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Originally Posted by gentilebrian View Post
So over the weekend we ordered a 2017 Freedom Elite RV. We were told that in order to deduct the interest like its a second house we would need a special loan type. Is this True? I have never financed a RV before. The credit union we normally use for cars and boats finances cars, boats, rv's all the same way as a auto loan. My accountant (turbo tax ) says I can deduct the interest but doesn't say what type of loan it needs to be.

Thanks in advance.

As long as your RV has a kitchen and bathroom facilities you can deduct the interest as a second home. The only restriction is that the RV itself must be the collateral for the loan. The interest is deducted as other loan interest on Line 11 of schedule A.

As a side note you can also deduct the sales tax if your sales taxes exceed your state income taxes paid. If you are installing solar panels or if they are delineated on your invoice you can also take a tax credit for those.
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Old 05-09-2016, 12:17 PM   #4
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As long as your RV has a kitchen and bathroom facilities you can deduct the interest as a second home. The only restriction is that the RV itself must be the collateral for the loan. The interest is deducted as other loan interest on Line 11 of schedule A.

As a side note you can also deduct the sales tax if your sales taxes exceed your state income taxes paid. If you are installing solar panels or if they are delineated on your invoice you can also take a tax credit for those.
Wnytaxman, As always, right on the money! The only thing I will add is that if you use a home equity loan to purchase your motor home, you will be in a grey area! Or maybe downright BLACK area! Even though interest on your primary home mortgage is deductible, and interest on your motor home loan is deductible, using a home equity loan to purchase, and deducting the interest since it is to purchase another deductible home . . . (with me so far?) I don't believe you can legally deduct, since, technically, the home equity loan is not being used to improve your primary residence.

I may be wrong on that, but I'm sure someone will correct me if I am, just something to think about!
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Old 05-09-2016, 12:59 PM   #5
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Wnytaxman, As always, right on the money! The only thing I will add is that if you use a home equity loan to purchase your motor home, you will be in a grey area! Or maybe downright BLACK area! Even though interest on your primary home mortgage is deductible, and interest on your motor home loan is deductible, using a home equity loan to purchase, and deducting the interest since it is to purchase another deductible home . . . (with me so far?) I don't believe you can legally deduct, since, technically, the home equity loan is not being used to improve your primary residence.

I may be wrong on that, but I'm sure someone will correct me if I am, just something to think about!
Scott, you are so close on the home equity line of credit. The interest is deductible as long as your total outstanding on the home equity line is under $100,000 and the HELOC along with the regular mortgage is less than the fair market value of the house.

Oh yes, one other thing. You are limited to $1 million on the principal of your mortgage so all you Newell buyers need to be aware of that.
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Old 05-09-2016, 01:25 PM   #6
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Scott, you are so close on the home equity line of credit. The interest is deductible as long as your total outstanding on the home equity line is under $100,000 and the HELOC along with the regular mortgage is less than the fair market value of the house.

Oh yes, one other thing. You are limited to $1 million on the principal of your mortgage so all you Newell buyers need to be aware of that.
Very interesting. By sheer luck we were within the guidelines you mention here, but it was not due to my full understanding of the tax law. Good to know I was within the boundary while we had the line of credit. All this is behind us now. But, there was a time when we were right on the line.

We went with an Equity line of Credit given the much better rate we could get on that option. I never realized how close to the 100K line we were. Later when home rates dropped so low, we rolled the whole thing into a single home loan so the line of credit was no longer an issue.

I am not suggesting others follow this route since you are funding a depreciating asset with an appreciating asset, which is not good financial planning. But, we did not want to sell off other assets at the time and it offered a lower overall finance rate.
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Old 05-10-2016, 07:37 AM   #7
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For some reason the IRS seems to rarely focus on the mortgage deduction. There are the occasional letters that go out about non-1098 mortgage interest being on the wrong line, but that's about it. I've never had that deduction audited on a client's tax return. Probably the heavy level of reporting on the amounts is what makes it less auditable.
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Old 05-11-2016, 08:39 AM   #8
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That's good news. Thank you everyone.

My credit union has great rates.

Odd thing is the finance person is finding rates and the longer the loan the lower the rates. Complete opposite of my credit union and any other loan I have ever gotten.
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