Alright, we'll jump right into this one.
So it is almost summer. We just had Memorial Day.
So it had me thinking lately, well,
you know, with a lot of people camping and taking their RVs out and
starting to get really warm. It's 90 degrees here.
And, uh, I want to take out a boat. I want to go to
the lake. So starting to think about all the recreational and fun things we
can do in the summer. I want to talk to you kind of the
way that I think about how you can get some tactics.
Tax deductions related to this. So today we're going to talk about how to
turn your toys into tax deductions.
So specifically, I'm going to talk about RVs like motorhomes,
boats,
even like side-by-side off-road rentals.
And I'll give you some websites for each of those, like some websites where
you could actually rent it yourself. Or if you're looking to rent those,
you can, you can do it. But first let's talk about the tax law
behind it. So first off,
I just have to give you. A warning,
because I don't want you to think like, oh, well, Brent said I can
go and buy a boat and write it off. And boats like boats are
expensive. Like you could easily spend 50, a hundred.
There's even boats that are $300,000 that are just like wakeboard boats.
And of course, when you get into yachts and all sorts of things,
it goes way, way, way more than that. So to start,
you can't just buy a personal boat and write it off on your taxes,
even if you buy it in the name of your LLC.
Remember. Where you buy it,
like what entity you buy it through does not dictate the deduction.
It's the usage of it that dictates the deduction.
And that's important because as you're brainstorming and you're thinking about potential new ways
to save on taxes, it's not just simply buying something in the name of
your business that gets you the deduction.
It's got to actually be used for business.
So quick, remember we've done an episode on this,
but you've got to, you've got to pass four tests for something to be
deductible. You need to have a business purpose. It needs to be ordinary in
amount, it needs to be necessary for the business,
and then you need to have documentation for it.
That's the acronym, acronym POND.
So purpose, ordinary in amount,
necessary, and documentation. Okay.
Okay. So now I'll give you some examples. So say you've got an RV
and I'm going to use just $100,000 for about all these examples.
It just makes all the math easy. So say you buy a $100,000 RV
and some of you, you may remember the story. Like in 2020, my wife
and I launched an RV rental business. So we were doing this,
but there's an adjustment you need to make for personal use.
So, so you buy this $100,000 RV and let's say that
you use it for Memorial Day weekend. So let's say you used it for
five days and then you're like,
okay, well I'm not going to use it for 30 days or say you're
not going to use it for the rest of the year. Um,
if you put it into a rental. Rental pool and that is available to
rent and you've got it being rented.
People, other people are using it. It's getting cleaned.
Like it's not available for personal use and it's in this rental pool.
Whether you're like, if you're managing it, you're self likely,
then we can take part of that RV as a deduction.
So we had, so my wife and I, we had,
we, we had up to three, we had four different ones,
but three were going at any like individual time.
Um, but only one of those was partially used for,
for personal purposes. The other two were 100% business use,
like just for the sole purpose of generating income.
So like on, in my example, those two were a hundred percent business use.
Business deductions, everything related to it, the repairs,
maintenance, upkeep, the original purchase price of it was 100% written off
because they were business use assets. But in your personal case,
if you use it five days out of the year.
Five days, say out of a 365 day
year, you go five divided by 365, if all those other
days it's available to rent and it's being rented.
It's a 1.4%. 1.4% of
that RV. So of that hundred thousand RV is personal use and you can't
deduct 1.4% of it, but that other almost 99% you can deduct
related to the business or the business operations.
And maybe, and you're probably going to use it more than five days or
just once a year. Sometimes it's easy to be like,
okay, over these three months, we're going to use it for personal purposes,
say March, April, and May,
but the rest of the year, we're going to have it for, uh,
business use. So then in that case, you'd be like, okay,
well, three months are personal use. Nine months is business.
So 25% of the year is personal.
So in that case on the $100,000 RV,
you would say take $100,000 RV.
And this is, so we're in 2025 tax year,
right? If they renew the 100% bonus depreciation, which we expect they
will for that RV that you used personally for three months and
for business for nine, 75% or $75,000 of that $100,000 purchase can be used.
To offset any of your other income. So a $75,000 deduction,
remember it's not cash back in your pocket. It reduces your taxable income in
whatever your tax rate is. You multiply that reduction in your income by your
tax rate. To figure out how much taxes you're saving.
So that's, that's the RV example, but it's actually,
so whether it's a boat, so we have some clients,
I've never, I've never had a boat that I used as a rental,
but we had RVs, we had side-by-sides.
We had a vehicle that we rented out,
but a boat, same thing. If you're using it three months out of the
year for personal purposes, you're taking your family and friends out,
and the other nine months out of the year,
it's a business. Like, it's actually a rental.
Like, a lot of the, the unlock here is that you're using it as
a rental, uh, for the RV,
for the boat, side by sides,
even cars. Just remember, it's like, you gotta decide.
Like, you gotta figure out how much the total costs were,
so original purchase price and like,
the operating and maintenance costs. Then we go to the business vs.
personal split of like, okay,
how much is personal, the days or the months. Or sometimes even the miles
used. And compare that to the,
the work or the business usage. And then we take a percentage of the
total. So, the, the answer is usually not like,
er, it doesn't always have to be like,
no, you cannot write off any part of your boat.
Because if it was rented, at least once,
or for over a certain amount of time or months,
um, you could write off part of it.
And so I just want you to think of that as you're,
you're buying or looking at how you're, you'll buy some of these fun recreational
activity toys and side by sides and vehicles and stuff.
So the, the tax law behind all the all of it is very,
it's very similar. Like the depreciation is where we get the,
the initial big deduction and then we're just splitting the costs after the fact.
So I told you I was going to give you the,
uhh, Like the websites where you can rent some of these.
So for, if you're doing RVs,
we used RV share and outdoorsy.
They both have their pros and cons,
but they both worked well. If you have just a regular V.
Cool. So you wanted to buy that sports car that's a part rental,
or you wanted to buy a large SUV or an electric vehicle that you
were partly renting out. Uh,
Turo, just T-U-R-O dot com.
This is a website I'd use for that. And.
Let's see. The other one for side-by-sides.
I've not used this website, but daytrail.com. It's like an Airbnb,
but for side-by-sides. Daytrail.com is where you could rent.
Even, like, motorcycle, snowmobile. Side-by-sides.
Like off-road vehicle type of things. And then,
if you had a boat, I actually might, I might try this.
I might, I might see how a boat rental might go,
but it's hard to get people you trust with a boat.
But, uh, for boat, Rentals, it's boatsetter.com,
it's getmyboat.com,
and rentaboat.com. I know some of these are like,
more for, like, yachts on the coastline.
I think some would be for local, Lates, lakes,
depending on where you live in the United States.
But that's why I would try multiple. So that was boatsetter.
Getmyboatinrentaboat.com. Okay,
so that is how you can get a deduction for some of your toys.
Some, Things that you're, you're having fun with and paying for anyways.
If you can turn it into a business deduction,
you can maybe get some of that cost back in tax savings on your
tax filings. And that is it for today.
See ya.
