Whether you buy a recreational vehicle to use for an occasional trip to the lake or live it it for months at a time, as long as it meets the Internal Revenue Service's standards, you can claim your RV as a second home. This can provide you with a tax break, as federal tax law allows you to deduct mortgage interest on both your main home and a second home.
Claiming a Second Home
Not all RVs meet the IRS' definition of a home. Your RV must have sleeping, cooking and toilet facilities. You don't actually have to live in your RV or even use it during the year for it to qualify as your second home, provided you don't rent it to someone else. If you rent your RV out, you must use it for at least 14 days during the year or the IRS will consider it rental property rather than a second home. This will also help ensure that you can claim RV interest on taxes.
Mortgage Interest Deductions
You don't get a tax deduction for buying an RV as a second home, any more than you would get a tax deduction for buying your main home. The primary tax deduction is the mortgage interest deduction. To qualify for a write-off, the loan must be secured either by your RV or by your main home. If you withdraw money from your individual retirement arrangement and pay cash for your RV, you have no mortgage interest to deduct. If you take out a personal loan that is not secured by either the RV or your main home, you can't take the mortgage interest deduction. You can deduct the interest if you take out a second mortgage on your main home and use the money to buy the RV.
Because an RV is not real estate, you don't get to take the real estate tax deduction, but you are eligible for a few other deductions. For example, you have the option of deducting either your state income taxes or your state and local sales taxes. You can take the sales tax deduction as part of an RV tax deduction regardless of whether you pay your sales taxes in cash from your savings, finance the purchase or withdraw money from your IRA to pay for it. If your state charges personal property tax on your RV annually, you can write it off regardless of how you pay the tax.
Withdrawing money early from your IRA usually results in a tax penalty equal to 10 percent of the unqualified distribution. The IRS waives the early distribution penalty on up to $10,000 if you use that money to buy a first home. The penalty isn't waived if you use the money to buy a second home. Unlike early withdrawal penalties on a certificate of deposit, early distribution penalties on an IRA are not tax deductible.
Filing Your Taxes
You can use IRS Form 5329 to report any early withdrawals from your IRA that are eligible for taxation. If your withdrawal occurs within the eligible time frame and is not early, you can report this transaction on line 15b of IRS Form 1040.
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