Lowering of the corporate tax rate in the 2017 Tax Cut and Jobs Act (TCJA) benefited the RV industry. An unintended glitch in the bill, however, effectively removed travel trailers from the definition of “motor vehicle” for floor plan financing interest deductibility. The law allows all floor plan financing interest charges on motorhomes to remain a deductible expense. Because of the glitch in how motor vehicles are defined, floor plan interest on travel trailers/towable units will be subject to a 30 percent limitation on interest expenses based on earnings before interest and taxes.
The RV Industry Association supports a technical fix to ensure that all segments of the RV industry are treated fairly by allowing floor plan financing interest charges on towable RVs to be a deductible expense.
Second Home Mortgage Interest Deduction
Under the U.S. tax code, RV buyers can deduct the interest on certain loans used to purchase RVs as a mortgage on a second home. RVs qualify for a second home mortgage interest deduction because they are a popular weekend and vacation ‘home’ for middle-class Americans. RV dealers all over America report that the second home mortgage interest deduction serves as a powerful incentive for middle-class consumers to purchase RVs.
During the recent tax reform debate, a compromise was reached that prevented the elimination of the second home mortgage interest deduction; however, it also decreased the mortgage deduction limit from $1 million to $750 thousand. If the tax reform bill had not retained the mortgage interest deduction, there would have been serious damage to our overall economy in the form of stalled U.S. manufacturing, weakened U.S. employment, and fewer RV purchases by consumers.
The RV Industry Association supports retaining the second home mortgage interest deduction for RVs.
Punitive and Luxury Taxes
To try and raise funds, state legislators have sought to implement substantial “luxury” taxes on certain automobiles and motorhomes. This could be in the form of an increased sales or use tax or registration fees. These taxes and fees unfairly target RV consumers and lead to an unbalanced RV marketplace in one state or surrounding states.
Similarly, state legislators have attempted to implement or substantially increase recreation or parks use tax only on RV owners, although there are diverse and numerous other users of the facilities.
The RV Industry Association opposes any proposed taxes or fees that unfairly single out the RV industry or RV consumers.