Declaring a Motor Home as a Second Home on Federal Tax Returns

A motor home can qualify as a second home, which can provide some tax benefits.
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Most motor homes can be treated as a second home on your income tax return. The tax laws encourage home ownership, and a second home is treated almost as favorably as a first home, especially if you borrowed money to buy your motor home. Even if you hardly use it, it will still qualify as a second home, unless you don't use it at all and only rent it to others.

Second Home Requirements

To qualify as a second home, a motor home must have sleeping, cooking and toilet facilities. That pop-up trailer with no kitchen or bathroom won’t qualify. You don’t necessarily have to actually use the motor home, but if you don’t use it, you can’t hold it out for rental or resale and still have it qualify as a second home. On the other hand, if you do use it at least part of the year, you can rent it out for part of the year and still have it qualify. If you rent it for less than 15 days, you don’t have to report the income. This gets a little complicated, so check with your tax adviser before deciding to hold it out for rent.

Mortgage Interest Deduction

The main benefit of treating your motor home as a second home is the ability to deduct mortgage interest payments, as long as you itemize deductions on your tax return. If you are married filing jointly, you can deduct interest on up to $1.1 million of mortgage debt. This includes mortgages on your first and second homes combined. Of the $1.1 million in debt, $1 million must be used to purchase or improve the homes. The remaining $100,000 can be used for any purpose, other than investing in tax-exempt securities, as long as it is secured by either or both of your homes.

Selling the Motor Home

The rules for reporting gain on the sale of your primary home differ from those on the sale of a second home. The IRS defines a primary residence as one where you lived for two out of the last five years and where you spent most of your time. When you sell your primary residence, you can exclude up to $500,000 of gain if you file a joint return. When you sell your second home, any gain is considered a capital gain on which you must pay tax. Losses are not deductible unless you rented the motor home out. In that case, you may be able to deduct part of the loss. This is another matter about which you should check with your adviser.

Other Considerations

If you own more than two homes, say a boat and a motor home, you can decide which you want to be your second home. You can only have one second home each year, but you can change your second home designation annually. The rules on mortgage interest deductions apply to only two homes each year.

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