Second homes that roam
Eight years ago, I watched an elderly couple spend two long days clearing a fallen tree from the driveway of their vacation cabin.
“We probably should have sold this place and bought an RV,” the man said. “I no longer want to worry about the next tree coming through the kitchen roof. Besides, we want to do some traveling.”
What the couple did not know at the time is that the RV — letters now commonly used rather than recreational vehicle — also can qualify for the mortgage interest deduction as a second home. Two years later they sold the cabin and bought an RV.
According to the Internal Revenue Service (IRS), all “second homes” must be used as security of the loan and must have basic sleeping, cooking and toilet accommodations if the taxpayer wants to claim the mortgage interest deduction. Virtually all RV types are equipped with these facilities.
RV salespeople say the mortgage interest deduction has bolstered sales and that many of the people who are buying RVs now probably would have purchased vacation cabins a few years ago. According to the Recreation Vehicle Industry Association (RVIA), more people are spending longer periods of time on the road — time often spent in a cabin.
The RVIA also notes that lenders are viewing RV buyers as reliable borrowers. Fewer than 2 percent of all RV loans are delinquent, the RVIA says, sparking lenders to extend RV loan terms and thus making monthly payments more affordable. The prices for RVs are all over the board. Some of the larger motorhomes easily crack the $350,000 plateau while some used, folding camp trailers can be purchased for less than $10,000.
Loan terms for new, large RVs typically range from 10 to 12 years, with some lenders willing to extend to 20 years. While many dealers offer their own in-house financing, RV loans can be obtained from credit unions, banks, savings and loans and finance companies. According to the RVIA, a majority of RV lenders require less than a 20 percent down payment, while some are willing to accept less than 10 percent down.
Mortgage interest is deductible on federal income tax on two homes. (Some analysts call the guideline the “Congressmen’s rule” because lawmakers need residences in their home states and the nation’s capital). Although mortgage interest is not a dollar-for-dollar tax credit, it does reduce taxable income.
The IRS publishes two booklets that contain information regarding the tax deductibility of loan interest. Publication 936 — Home Interest Deduction and Publication 523 — Selling Your Home are available via 800-829-3676.
And, there can be an investment side to an RV. Depending on time of year and area, dealers and rental outlets generally charge between $170 and $250 a day for motorhomes and from $100 to $120 a day for truck campers and travel trailers. Those who rent their units typically charge less.
Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk-show host.
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