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Ask Dr. Fiona Chen Your Own Question
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 482
Experience:  Former IRS Revenue Agent
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We just started renting out our rv for months now. Wharf

Customer Question

We just started renting out our rv for months now. Wharf deduction are allowed for business use. I get questionsome why is rv rental tax so high in Arkansas 20.9 percent. I have not found a source to explain to my renters why it's so high.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: We bought the rv this year and to help with the monthly payments we have rented our rv 9 times in the last 3 months. Can we deduct mileage(at what rate) , depreciation(what %), interest on loan on a,class c motor home, repairs and maintenance on RV. We have use the motor home 15 % for personal use. Does a second home come into play just on the 15 percent on personal use? Does the other 85 % fall under business use and how does that affect writing off the interest on the business?
Submitted: 1 year ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 1 year ago.

Dear Customer,

1) RV rental tax rate. The way you are renting, it could be treated as motel, hotel type of renting and not a residential rental. Even if it is residential, the locality may charge motel/hotel tax to protect the local business industry to put everyone at a level plain. You may have been using some "share" app on line. Also, you could be also considered a vehicle rental tax. Then, there is a three levels of government tax, the state, county, and city tax. However, if you want to verify with the tax authority you hand over the tax money, they should be able to provide you with an itemized listing on how the 20.9% is added. -- Otherwise, they cannot charge you.

2) RV can be treated as a vacation home and/or person property. You need to report all income and all expenses. Use the rental days rule. You probably have to do proportional distribution on the deduction of mortgage interest. How do you feel about not to deduct mortgage interest in this category but deduct it under your Schedule A? Do you have more than two mortgaged houses already or is this the other one?

But if you use the vacation home rule, more than 14 days of personal use, you have to use proportional rule and not allowed to take loss. It is 14 days not 15%, I think. If you have information to get that 15/85% rule, please let me know.

3) In terms of other costs, I am not sure that this is a vacation home. You are taxed (or government has taxed you) as a motel/hotel or vehicle rental tax. Most people who rent out their vacation home are treated as a residential property rental. They are not charged with any tax at all.

4) I would suggest you to make it a business. If you want to, you can report it on your schedule C of your Form 1040. What you are doing, viewed by the government, is a rental of personal property. So, your business is rental of a RV for temporary stay. It is like a motel/hotel business.

The normal rental of residential (vacation) home rules are to differentiate bona fide residential rental from vacation home use and to prevent people to just rent it for several days and to deduct all the costs. So, the rule is not allowed for rental loss if it is on vacation home.

Well, your rental is now a motel type of rental for patron's temporary stay. It is a regular transit stay business and not rental of residential home.

It is suggested that you check out how the motel/hotel business are run and how they report income and expenses. Below are some suggestions for you to start.

a.) Report all income and expenses. Record and document patrons' records as hotel/motel books. You probably have local government requirement on what type of records and rules you have to follow anyway. They charge you tax for a certain purpose. Supposedly, they are requiring you to follow certain rules and regulations, but they also provide certain services such as, police patrol route several times a day, etc. Ask what type of services they provide for you.

b.) You can place some water, snack, towels, etc. in the RV and if the clients choose to use them, you can charge clients accordingly and make a profit. You can see whether you can get free W-Fi from ComCast. They give business free Wi-Fi to provide to their customer to attract business.

c.) As to the mortgage interest and the property tax and depreciation. I have a suggestion for you to consider. It depends on your purpose and plan on this thing (business). I don't think it is a rental of residential or commercial property. If you are serious about getting as much money as possible. The days (14) should not be an issue here. However, if you don't rent out as much and make it available for rent for 365 days, there could be an issue because there is only one RV. It is different from motel with many rooms.

So, there are two choices that you can deduct them proportionally based on available to rent days to total 365 days and treat depreciation the same way as the rental property.

The other way is to deduct mortgage interest and property tax on Schedule A. Do depreciation only on the rental available days from a year on Schedule C and forget about the other depreciation. You can do the same for mortgage interest, too. That is to only deduct proportional mortgage interest and forget about the rest. Personal property tax is allowed 100% on Schedule A. This suggestion is because the RV cost is relatively low in comparison to a house.

d.) This is more than Schedule E residential property rental. This is a business activity. Just by looking at Schedule C you will see the items deductible. In a way, it is similar to rental property. For both types, yes, you can deduct mileages which you go to show the place or clean it up or make repair. Keep a log of your trips.

e.) If you are serious about the matter, you may want to write to the IRS to request for a private ruling letter. I believe that there is no current IRS ruling on the matter. You can give them what I suggested and ask them how they think. This is the new economy of share culture. Our nearby locality is proposing to charge hotel tax on residents who share their house through mobile app. Then, the record of the guest stay is becoming public information for that locality, etc.

f) You are renting a RV, a personal property. The most important thing is that I don't think you should be limited to 14 day rental days of no loss allowed. You also need to get business insurance for any motel/hotel business to protect yourself.

g) I want to conclude that if you chose the rule of a renting out vacation home, you follow all those rules. See rules and regulations here.

But you are not sharing a part of your home. You are renting out a RV. So, you do have a choice of treating it as a rental of personal property.

But in fact, the local authority of where this RV is have already ruled you as a motel/hotel or rental of vehicle business, this is a business beyond rental of residential or even commercial real estate property. You should be able to entitled to the tax benefits of such a business because you have to follow all the rules of running such a business.

Find a professional CPA locally to help you.

I need to stop some place for now before this becoming some type of position paper of length.

Please feel free to follow up.


Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

Expert:  Dr. Fiona Chen replied 1 year ago.

Dear Customer,

p.s. Rental of more than 15 days need to report rental income.

Calculating rental loss proportionally, if the personal use is 14 days or more or is 10% of the total days you rent it to others at a fair rental price

Please feel free to follow up here with me.

When I said local CPA is for your bookkeeping and for tax return preparation. Their complexity probably requires a professional help.