Thursday, October 30, 2014

RVs and establishing a Tax Home

Q.  My husband permanently works over 2 hours away from home and currently is driving to and from work every day which means he is on the road for over 4 hours a day and drives over 200 miles a day. He has a start time for his shift but not an end time; if something happens at his place of work he has to stay late making it even more difficult because he hardly gets any sleep.

 We cannot move near where he works for a number of reasons but he cannot take the commute any longer, he is exhausted. So we were wondering if we purchased and RV and parked it near his place of work so that could stay their during the week would the RV parking, RV purchase itself (we are buying it cash), or any of the RV expenses such as maintenance be tax deductible?

I have searched for the answer to this question everywhere and can't seem to find it, so I would really appreciate it if you could shed some light on the subject.
A.     Oftentimes there is just no justice in the world, and your case is one of them. For reasons of both physical & mental health, I see that purchasing an RV to park near your husband's work would be an excellent idea. However, in doing so, you would receive absolutely no tax benefits.  The reason is your husband's place of business is his tax home, which is different from your domicile.

The example I most like to use is that of elected senators & congressmen. They must maintain their residency in the state they represent, yet they need to travel to Washington DC, which becomes their tax home. None of their travel expenses are deductible as that would be their commute, and the cost of maintaining their second homes around the DC area also are non-deductible as this is considered their tax home.

Regrettably your husband is in the exact same predicament. Possibly the cost of a residency style hotel or studio apartment might be cheaper than the investment he would make in a RV. I suggest you check out all the possibilities including a boarding house. Getting sick shouldn't be an option. Good luck & thanks for writing!

Determining CA Residency

Q.  My wife and I are visiting California and a few more states.  We were going to stay in California for six months then move on.  One of the full time RV's in the resort that we are staying at in California told us that if we stayed one day over six months that we would have to pay California state income tax.  We are retired and still own a residence in Washington state where we do not have an income tax.
We were also told that the six months is based on a rolling year not a calendar year
We were in California for about six weeks earlier this year so it looks like if this information is correct we will have to leave California sooner! Can you please tell us if this is correct information?

A.  No doubt there is a lot of mis-information making the circuit of RV parks.  According to the Franchise Tax Board (FTB) your intent constitutes a large part of whether or not you will need to file a state tax return. Here is a link on how to determine residency.

I have never heard of a 6 month rule or a rolling 6 month rule. You may have made yourself a part-year resident, and Pub. 1031 explains the circumstances where that can happen as well as residency rules with several examples. 

CA taxes residents & part time residents on their world wide income, and during the period of time you are not a resident, only on CA sourced income. Being taxed on CA source income is a reality (if you meet the filing requirements) regardless of where your actual domicile is. And in these economic times, almost all states are following this practice.

On the left side of this blog, you will find links to all 50 states. It would be prudent to pay attention to any state you plan to visit for an extended time period to ascertain what, if any, income tax or property tax liability you may incur. Thanks for writing!

Tuesday, September 30, 2014

Tax Court disallows RV Business Deductions

As I have often repeated, much of what we think may be deductible is conjecture until a case comes to court and a ruling has been made.

Sadly, RVers who took deductions for depreciation and interest on their RV, even though the tax court acknowledged primary business usage, were disallowed due to conflicting language in IRC section 280A. The ruling Jackson, T.C. Memo, 2014-160, August 7,2014 is likely to be the precedent the IRS will follow in the future. (Please use link for full text & details)

The ruling cost the taxpayers $42,228 in back taxes covering two years and an additional $8,445.60 in penalties for a total of $50,673.60 - ouch!

Although this ruling wipes out our ability to take depreciation and interest, there are still several deductions available to RVers using their rigs for business. If you keep scrupulous records as to mileage and expenses, you can prorate the business use for the vehicle(s) in question; and if you meet the requirements for mortgage interest, they can still be used in full on Schedule A, so all is not lost. I would caution you not to use the mileage method for vehicle costs as there is a component of depreciation in the mileage rate. Therefore, it is prudent to use actual costs; however, most RVs today cost far more to operate than any mileage rate allowance, so this should not pose a problem.

As a total aside, the vast majority of questions this year were repeats of what has previously been published, thus I only posted questions which had not been covered. So, although 2014 is pretty skimpy as compared to past years, please keep the questions coming and if they have not been previously addressed and are of general interest, look for the answers here. Thanks for your continued support!

Tuesday, March 11, 2014

Pipeliner challanges

Q.  We really need some help.  Several family members are pipeliners and live in their RV or hotels in different states for different companies throughout the year. We reside in the midwest..

1.  Can we just take the standard daily living allowance and meals deductions instead of keeping up with receipts and using expenses of RV maintanence/depreciation/supplies?  Life would be simpler and we would have more deductions.  I cannot find where it says we have to use receipts instead of daily allowance.  All of our RVs' are not expensive so deprecation is not great.

2.  We use as deductions:  business/medical miles, donations/membership/contributions, wireless, union dues, property taxes, work related/clothes, hotels, RV rent, RV repairs/supplies, laundry, ATM fees, satellite charges, and work miles. Are there others deductions?  If we used the standard daily allowance, the list above would be shorter.

We use CPAs' but I don't think we are getting the proper refunds.  We make a lot of money BUT we spend a lot of money on the road.

Thank you in advance for you help.

A.  You ask some very reasonable and sensible questions, but if you are working as contact labor (self-employed) without benefit of W-2 forms, you will not be eligible to use the per diem rates. They were designed for employers and or the government to simplify their bookkeeping! For your convenience, I am linking Pub. 1542 for your perusal. 

Unfortunately we taxpayers are saddled with massive amounts of record keeping in order to keep the IRS auditors at bay. If you are full time RVers you have the additional challenge of changing your tax home as you move from state to state.  Most likely you don't stay long enough to qualify for the moving expense deduction. I wish I had better news for you, but can only tell you what the regulations currently allow.

If by chance you are employees and not independent contractors, then it is up to you to contact the level of management necessary for your employer to agree on some type of compensation or per diem allowance to compensate you for your expenses. Good luck & stay safe!

Monday, March 3, 2014

Lodging at the Elks Clubs

Q.  Are Elks and Moose Lodge camping fees income tax deductible?  

Instead of calling it a camping fee, most lodges ask for a "donation" to the lodge to stay in their RV spaces.

A.  I've answered this question in the past, but since it is so timely, decided to re-post this question.  Since you are receiving a benefit from the "donation," the answer is no.  It is similar to going to a big benefit dinner. When you purchase the ticket, you will usually receive a letter saying the cost of the meal is $30, and therefore only $70 of your $100 ticket is considered a charitable deduction.

Without a letter confirming the value of your "donation" and specifying the amount of the benefit received, the IRS will not allow the deduction on Schedule A of your tax return.

Saturday, March 1, 2014

Deducting RV Interest

Q.  I was researching for a tax question and came across your blog. My husband and I are full timers in New England, however his legal residence is GA, he's military. We recently filed our return jointly and discussed claiming the RV's interest. We were advised to not claim it if it were under $12,200. Is this accurate and why so? Also is the interest only deductible for the first year or the duration of the loan? This is our first purchase and year living in the RV.

A.  You can claim a deduction for interest on your RV for any amount, although I think the reason you were advised against it is the Standard Deduction for a married couple is $12,200.  That is the amount you can take regardless if you have enough deductions to claim or not.  What I mean is that the total of your medical, charitable contributions, state income taxes, personal property taxes, home mortgage interest, and your miscellaneous deductions would need to exceed the $12,200 before it would be beneficial to you.  I hope they took all the other items into consideration as well. Your interest normally will be deductible for the duration of the loan.

Thanks for writing and enjoy your RV.  Thank your husband for serving our country!

Monday, February 10, 2014

A Traveling Martial Arts Instructor

Q.  As a Martial Arts Instructor, I have students in several states and also teach workshops and seminars. This March I will become a full time RVer and plan to travel to all these states, as I have before, but rather than traveling by air, I will use the RV.  I plan to spend more time with my students along with attracting new students when I visit each state. Although my mailing address will be in SD, I plan to teach for 2 weeks at a time in several states such as Kansas, Kentucky, Missouri, etc. What are the tax issues involved?

A.  You should be able to take advantage of all the travel expenses you had prior to becoming a full time RVer. Your challenge will be keeping your tax home in just one state. As long as you return to your home base, after each visit, this should not be a problem, but it is possible that the IRS could challenge you as to your travel expenses.  I would try to establish a schedule similar to what you had before. Extending your schedule to accommodate new students should not pose a problem.

It sounds like you have created a great niche for yourself. Have fun and good luck!

Wednesday, January 22, 2014

Working Camping

Q.   I have questions on what I can and cannot deduct on my taxes while work camping.  My wife and I use our trailer full time and started work camping in 2013.  My first job was a host and remuneration was a full hook up site.  This lasted for 120 days (4 week). I went on an interview for an Asst Manager position and was hired with remuneration a full hook up site plus $150.00 credit towards propane and electric.  My question is can I deduct mileage for the trip to the interview and moving to the new park, any overage costs over the $150 credit and since I am required to own and live in my RV at this job any upkeep expenses?  Both jobs are in California where we are California residents.  Sorry for the length of the question and thanks for your time.

A.  The RV lifestyle as wonderful as it is, is not viewed favorably in the eyes of the IRS who doesn't acknowledge our existence.  Although job seeking expenses are deductible on Schedule A as a miscellaneous itemized deduction, making your trip for the interview deductible, the actual cost of getting there is considered a commuting expense. You simply don't stay long enough to qualify under the moving expense deduction.

The good news is that since you are staying there for the convenience of your employer, the fair market value of the site and your credit is not taxable income. Any out-of-pocket costs for additional utilities are considered personal. Wish I had better news, but enjoy your stay and keep healthy!

Monday, January 20, 2014

Taxing Out-of-State Visiting RVers

Q.  We travel extensively in our RV since retirement a few years ago, but are not yet truly declared FT'ers, since we still maintain our residence address in Texas.  However, today while we are visiting old friends in Florida for a few weeks, we received our current Dish Satellite TV services bill which had two new Tax items labeled "Communications Services Tax" and "Video Gross Receipts Tax" which we had never seen before.  So I questioned these new taxes, and was told by Dish these are "Florida taxes required by the FCC".  Although we have been been in the state less than 2 weeks and visited 3 different FL addresses since we crossed the border, I can almost rationalize these taxes as a FL sales tax on services obtained while in this state.  I am most concerned with my vague recollection of a generally related article published last year in one of our many RV magazines, about a couple who visited Florida for some extended but temporary period and ultimately received an irrefutable LARGE Tax Bill of some sort, I think based on the RV book value. 
So my questions are, and on behalf of all us RV visitors to Florida and/or any other applicable state:
  1. Are there any other Florida state "Billable" taxes (other than the expected OTC sales taxes, etc.) we may be liable for when visiting here; and by what authorization/justification/statutes, etc. are these based?
  2. Are there any other states that have or are currently contemplating such a new source of taxation on us RV'ers?
Many Thanks for your quick reply, since it will have a definitely influence any future time we plan to be in the sunshine state.

A.  This reply has been anything but quick since I am at a total loss. We have visited Florida a few times, but have never received such a bill.  Apparently there is some type of GPS tracking device on your Dish antenna. We use Direct TV, and it's possible when last there, Direct TV hadn't caught up with the current laws and or technology. I realize most states are hurting for revenue and are trying anything to bring in additional revenues. This is a prime example of taxation without representation! I do my best to keep up with income tax laws, but now I am totally above my pay grade with your question - sorry!

So, this seems like a perfect opportunity for our readers to jump in and tell us your experience. If anyone has further information on this, I will be delighted to post it for all to read. Thank you for your help.