RV Rental Business Expenses and Other Questions

[BHall01]

Hello,

September 2022, I purchased an RV (travel trailer) with the intent of starting a rental side business by renting it out on Outdoorsy. I took out a loan for the RV and paid a down payment. I purchased over $1,000 worth of items that are required for the rental business and that will conceivably last longer than a year (leveling chocks, hitch locks, sewer hoses, power cables, dishes, bedding, and other niceties for our guests). We did not get any renters in 2022, because it was already late in the year, and we did not earn any money. We used the RV personally for two nights, and I spent a whole day towing the RV up to camp sites to take photos and video to create an instructional video, and prepare the Outdoorsy listing. I estimate that one-third of the use of the RV last year was for business use (counting it as one "night" towing it up to camp, making the renter instructional video), and the other two-thirds of the use of the RV was personal use (the two nights we used it for personal use).

I need some help getting this entered into TurboTax and properly.

Questions:

• When adding the RV trailer as a capital asset, I selected "Tools, Machinery, Equipment, Furniture -> Trailers and trailer-mounted containers" and then selected "I have not always used this item 100% of the time for this business" and entered 33.3% business use. Is this correct?
• The depreciation amount is very small for 2022 (like $500). Is that just because it was placed into service as a business asset later in the year? Will future year depreciation amounts be larger given an entire year of service? (Note: I chose to NOT take the special one-time bonus depreciation because we may end up selling the trailer after 2 years or so to keep our rental RV new. Was that a good move?)
• How should I enter deductions for the $1,000+ worth of purchased equipment? As "supplies" or "assets"? Could these qualify as "De Minimis Safe Harbor Election" since all items were under $2,500, thereby allowing me to write them off as expenses one time?
  
• Do all of my deductions need to be multiplied by 33.3% (deducting only the one-third business use of the RV in 2022 for depreciation), or can I deduct 100% of my non-capital depreciation expenses? (the $1,000+ worth of required equipment like leveling chocks, hitch lock, sewer hoses, power cables, dishes, bedding)
• Can I deduct RV insurance? (If so, only 33.3% or 100%?)
• Can I deduct the interest I pay on the RV loan? (If so, only 33.3% or 100%?)
• Since we didn't have any income for our business in 2022, do I just enter $0 in the income section? (even though I did that, TT is still saying "You haven’t entered any income for this work yet.")

I know that is a lot. Feel free to answer only the questions you feel like answering. Thank you in advance to any who contribute!

[PattiF]

Here are some answers and responses to your questions and comments:

• The correct category for the RV is Tools, Machinery, Equipment, Furniture - Trailers and trailer-mounted containers as you picked. And the business use percentage  for 2022 (33.3%) is correct.
• The depreciation for the first year was only $500 because the RV was only in service for a few months. This category of Trailers and trailer-mounted containers defaults to a 5-year depreciation. There is no necessity to take bonus depreciation and the way that you are depreciating the RV is fine.
• The essential items that you purchased can be classified as supplies. They would qualify under the "De Minimis Safe Harbor Election". These items may need to replaced frequently since renters can break or lose items such as hoses and cables that are necessary for the RV experience.
• RV insurance is an allowable expense, but only 33.3% for 2022.
• The interest that you pay for the RV can be entered on the business and also on Schedule A as mortgage interest. This would be divided 33.3%/ 66.7%.
• Since you have no income to enter at this point, $0 is good.

Did you have any expenses starting an account with Outdoorsy? Any expenses would be fully deductible for 2022.

You can also include vehicle registration fees and title fees.

[BHall01]

Thank you so much, @PattiF! Your reply was extremely helpful. Follow-up questions:

• How do I enter insurance expense and loan interest expense under my RV Rental "business" in TT? I can't seem to find the right category when I click "Add expenses for this work"
• I currently have the $1,000+ in essentials listed as "supplies", but should I add them as assets in TT and then follow the prompts for the "under $2,500" de Minimus Safe Harbor Election?

(Dave answered these two questions below)

Thanks again for your guidance!

[DaveF1006]

If you are using Turbo Tax Self-Employed go to:

1. Less common.  You will see categories for Credit card, loan, and other interest. Also there is a category for business insurance expense.
2. It depends on the supplies being used. My suggestion is to report these under supplies.

Here is a screenshot on where you would enter the interest and insurance expense.

[BHall01]

Thank you so much for your reply, @DaveF1006 . This is super clear, and super helpful! Cheers!

[RMichael]

I have a similar question. I rent my RV on outdoorsy. It was purchased for this purpose and we used it for personal use less than the 14 days permitted. Can the payments I make on my loan be written off? Just the interest? The RV is in my name but the business is an LLC (single member). 

[CatinaT1]

Yes, the interest is deductible for the business.

[RMichael]

Thank you! Only the interest or the payment as well? I have been paying the loan from the business account income.

[DaveF1006]

Only the interest is deductible.

@RMichael