Writing off a business RV?

Dear Tax Talk,
I am planning to buy a motor home to use, in part, to get around to some of my client base. I intend to install a satellite Internet system so that I can keep in contact with clients while traveling. It will be a mobile office.

I was told that I could deduct the full cost of the RV as a business expense and the interest from the loan as a second-home loan deduction. My income this year should be close to $100,000, but it is commission based and I can't be sure. Is this information correct? Can I deduct the whole amount of the RV and can this deduction be carried over to other years if my income is not large enough to warrant the full deduction in one year? Thanks. -- Robert

Dear Robert,
Not only are you contemplating a road venture, you're also venturing into a delicate area of the tax law having to deal with entertainment facilities.

An entertainment facility is any property you own, rent or use for entertainment. Internal Revenue Service examples of an entertainment facility include a yacht, airplane and, although not specifically enumerated, it would also probably include a recreational vehicle. Generally, you cannot deduct any costs relating to the use of an entertainment facility, such as depreciation, maintenance and insurance. While it's true that a corporate jet can be considered a legitimate expense, it's because the expense is considered ordinary and necessary in a particular line of business.

You don't indicate your line of business, but this would probably be key in determining the legitimacy of the deduction just as it would be for a corporate jet. For example, if you're a physician or veterinarian and you use the RV as an office to meet with rural patients, then you can probably claim the full amount of the RV as a business deduction. If you could travel around to your clients without the need of a motor home and you have another office available to you, then the deduction is probably not an ordinary and necessary part of your business. Since you start out saying that you'll use the motor home only in part for business, its deductibility is questionable as to necessity.

If the RV deduction is considered ordinary and necessary, then the interest would be a business deduction and not a second-home mortgage interest deduction. If the motor home is not a business deduction, you could still claim the interest as second-home mortgage interest. I suggest you get advice from your accountant on how you can reasonably justify the expense of the motor home in your line of business.