Tag: deduction

Posted on by Jan Roberg

Can I Claim My RV as a Business Expense?

Modern Senior On Vacation With Wifi

 

I had a client that owned his own business and he wanted to buy an RV so he could go on vacation with his family.  He wanted to know if he could write off the cost of the RV as a business expense if he put a sign about his business on the RV while he traveled around the country.  The answer to that is a flat out no.  The IRS is all over that idea and they don’t like it.

 

But, it may be possible to write of an RV as a business expense if you really do use the RV for business.  For example, let’s say you have clients in another city that you regularly visit.  When you are visiting those clients, you normally need to spend time in a hotel.  So, maybe the RV might be a good choice for you.  You could travel to the location in the RV and sleep in the RV instead of a hotel.

 

So I said you might be able to claim it—this isn’t a rock solid deduction.  You’ve got to be able to prove it’s truly a business expense.  There are a couple of things you must absolutely do.

 

  1. You must have a log of all of your miles you drive in the RV.  Not one of those, oh I drove some business miles and write it down later—a very serious, a very real mileage log.  Over 50% of the miles you drive must be used for business to try to take the RV as a deduction.
  2. You must also keep a log of all the nights that you sleep in the RV.  Same rule—over 50% of your nights sleeping in the RV must be for business.
  3. You must also keep your business trips shorter than 30 days so that the RV counts as transient lodging.   That means I can’t buy an RV and drive down to Florida for the entire tax season and spend my summers in Missouri.  (Well I could, but I wouldn’t be able to write off the RV as a business expense.)

 

And the main point you must absolutely keep in mind—do not use the RV for entertainment.  No business parties on the RV.  The IRS is pretty strict about that.  Entertainment facilities are not tax deductible (things like swimming pools, hunting lodges, and bowling alleys.)  Make sure that your RV is for lodging or travel—not for entertainment.

 

So although my client with the sign idea couldn’t claim the RV as a business expense just for putting a sign on it, if he chose to drive the RV on his business trips and stayed in the RV overnight instead of a hotel—he might be able to claim part of the RV expenses for his business, as long as his business use was more than his personal use.

 

Remember, trying to claim an RV as a business deduction is kind of “out there” and highly likely to be audited by the IRS.  You’re going to want to have really good documentation and a good accountant to back you up on this one.

Posted on by Jan Roberg

Tax Tips for Artists: Why You Might Not Want to Donate Your Art

Paintbrushes

Photo by John Morgan on Flickr.com

If you’re an artist, you may have been asked to donate a piece of your artwork for a good cause.  You might have also been told that it’s good PR for you, because people at the event will get a chance to see your work and bid on it.  And of course you’ve been told that your donation is tax deductible.

While it’s true that your donation is deductible, it’s not nearly as deductible for you as it is for me.  Come again?  You heard me right—your art donation is not as deductible for you as it is for me.  Let me give you an example:  Let’s say you donate a painting that would normally sell for $500.  If I bought that painting and donated it to a charity, I’d get to write off the full $500 on my tax return as a charitable deduction.  If you donate that painting instead, you can only write off the cost of the materials that you used to create that painting—depending upon what materials you’re using, that’s maybe $50 to $100.   

Additionally most artists are sole proprietors, their art income goes on a Schedule C on their regular 1040 tax return.  Your charitable donation can’t be counted as a business expense, it must go on your Schedule A with your other personal itemized deductions.  If you don’t already itemize your deductions on a Schedule A, that donated painting gives you no tax benefit whatsoever.

I’m not saying that you can never donate to charity, I like charities and I think they deserve donations.  It’s just that when you donate your art, you’re not getting much bang for your buck.  So what are your alternatives?

One thing is to pay to “advertise.”  For example:  I support a small, local ballet company.  I used to just donate money to them, but now instead I purchase an ad in their performance program.  They get the money they need and I get a business deduction for advertising.  This is especially good for me.  Before, being in the 25% tax bracket, my $100 donation was worth $25 off my taxes.  Now, as a business expense, my $100 advertisement reduces my taxes by $40 ($25 from my regular tax plus an additional 15% for my self-employment taxes.)  The advertising option gives you the best tax value on your donation because you can use it to offset your self-employment taxes.

Do be careful about the charity advertising though.  I once did an ad thinking I was supporting a local organization, when really the money was going to an advertising agency.  The organization got some money, but most of it went to the promotional company.  I won’t make that mistake again. 

Another option for you is to donate the profits from one of your art pieces.  For example, let’s take that $500 painting; assume you paid $100 for your materials,that’s a $400 donation to the charity.  Most likely, that’s a better donation than what the charity would gain if they auctioned one of your pieces off.  If you’re in the 25% tax bracket, you still get a $100 reduction in your taxes.  It won’t help with your self-employment tax, but you do get the good feeling of making a donation and your art work sells for its actual retail value instead of some discounted auction price (another disadvantage of donating your art for charity.) 

There are many worthwhile causes out there that need and deserve your help.  If providing a piece of your art work is how you want to help, by all means do it.  Just remember, it’s not your best tax strategy.