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Friday, February 26, 2010

Comments

"It's never smart to pay interest you don't have to pay to get a tax deduction."

"Amen" to that - about 100 times. :) Debt is what keeps people working longer - or sometimes forever.

Howard,
You are truely something my friend.Not only do you take the time to answer questions, but your in-depth coverage is amazing.Besides you and Linda being great people.You show your care for each and every reader by showing us the cold hard facts.No fluff!! That is one of the reasons RV-Dreams keeps growing and growing, while others just write for thier own entertainment.Thank you for being you.You always are going above and beyond for all of us readers.This is one of the huge reasons that I cannot wait for the Rally.My travel budget is very tight,but I consider it a wise investment to be taught by people that truely care that I learn the right information.I can rest assure that whatever research and hardwork needed to be done to teach a subject was done.Not to mention the FUN and new friends I'll make at the Rally.Anybody that might be just tuning in to this great website, would be wise to make every effort possible to get to Longs,South Carolina on April 7 to the 11th.I will get off my soapbox now, but I mean every word with all my heart.

I always pay interest when my yield on the money exceeds the cost of the interest.

Great info, Howard! I'll add one item - for 2009, there is a partial sales tax deduction on the purchase of a new motor home only (no used and no towables). Here's the link to my blog post discussing this:
http://protechrvtravel.blogspot.com/2009/10/2009-sales-tax-deduction-for-new.html It includes a link to the IRS web site as well.

Howard – good write up in general, however you did not address the potential the offset of having the money that you would have used to purchase the RV (or house) invested. There are times when income of the investment plus the savings in taxes could swing the equation the other way. In addition if you have the money invested and need to liquidate investments to purchase the RV (or home) – you will have to take into account capital gains taxes to figure out what really makes sense for their individual situation.

Thanks for the post Howard. Great information and the same advice I would have gotten from my dad who spent his career managing finances. Pay as you go or don't go. That's my modus operandi.

I would go with Howards method any day rather than what you MIGHT gain with investments.

That's the best advice I have seen on an RV site, ever.

Thanks for the details. We already made our choice early on in our research. Your reference to Dave Ramsey and staying out of debt were enough for us to give up the idea of financing an RV.

What a great post with lots of details.

Thanks for the info and taking the time to spell it out.

We plan to discuss the "long term homeowner" topic with our tax preparer. Since we sold our home and now full-time in a motor home, we want the credit if a motor home qualifies. A houseboat qualifies so I'm hoping a motor home will qualify as a "mobile home" - it's a home and it's mobile :) Wish us luck!

Howard, as a Certified Financial Planner I am compelled to caution you against dispensing financial advice that you are not qualified to give. For some, borrowing for an RV purchase is inadvisable but for many it's perfectly appropriate. Your assertion that "it's never smart.." is irresponsible and your argument doesn't support it. As Bill and Barney have noted, you completely ignore opportunity costs. Please be more careful.

Paul G. Witwer, CFP

Hi Paul,

I respect your position and appreciate the caution. Perhaps I shouldn't have used the word "never", but I certainly can't think of a scenario where it is smart to pay interest you don't have to pay just for a tax deduction. I agree there may be other reasons that make it smart. :)

Also, I was trying to be pretty careful to qualify the entry to financing for the sole purpose of taking an interest deduction. Opportunity costs weren't really part of the discussion, but they are certainly a consideration. :)

Howard,

Keep on stating your opinion, Howard. I have listened to enough "CFP's" in my life who have given me nothing but bad advice that I am ready to choke the next one who tries to tell me that they are the experts and we are the novices!

Excuse me, but where waa their expert advice before this last mini depression that lost so many people tons of money?

It is these "experts" that I am way too leary of as they have a vested interest in taking our money, whether we make any money or not.

You, on the other hand, have nothing to gain and I respect that. On top of that, because he so eloquently put CFP behind his name, I immediately dismissed his opinion in favour of yours...kind of like when you go shopping for a car, RV, etc...and the salesman tries to show off how much knowledge (?) they have.

Here's to Howard and his opinions.....KEEP UP THE RANT! Perhaps one day we will listen more to people like you and less like him.

Celebrating nicely up in Canada (WOO HOO!!!...Gold for the Canucks Hockey Team!)

As a person currently working towards the CFP, I agree with Paul about dispensing advice outside of one's expertise. Everyone's situation is uniquely their own and should seek out qualified advise from someone they trust to help them figure out what is best for their situation, goals and future objectives. This would include not only a Financial Advisor, but a CPA and trust/Will attorney as well; In fact, the group should be working as a team for consistency and your overall best interest. Rich

Howard, you have given excellent advise. I totally agree. I have a financial adviser, a CPA and a trust/will attorney but when it came to paying for my RV I paid it off from my house sale before investing the remainder, that was before the market tanked. No matter what the market condition I would have opted to be debt free before starting my life as a fulltime rver.

I would like to tell everyone to be loving, kind, and considerate to your spouse but since I am not a marriage counselor I can't tell you the obvious. Carry on Howard.

It’s my industry’s own fault that people are so naïve about borrowing. For decades we focused on investments to the exclusion of the liability side of the balance sheet. So, when someone like Dave Ramsey comes along preaching that indebtedness is the bane of modern civilization, people eat it up and beg for more because they have no frame of reference.

The reason that I chose to comment on this post was to stress that broad statements about financial matters are dangerous and every situation should be analyzed on its own facts and circumstances.

Forget it Paul, it appears you're preaching to the wrong crowd here! Now, as a former full-timer (2.5 years) I'm wondering where the 'carefree', 'stressless', 'laid back wonderfulness' of the RV lifestyle, that is (was)the cornerstone of this site, has gone? Lot's of defensiveness, anger and closed mindedness here!

Let me assure everyone that the spirit of wonderfulness of the full-time RVing lifestyle is quite alive and well in this website and in the vast majority of the RV-Dreams Family. :)

We recently sold our home and are now renting but are considering an RV.

Your article helped clear up some mis-conceptions. We were going to take a home loan in order to get the deduction but with the decreased income it doesn't make as much sense.

Thanks for the content. The example was quite revealing!

so can I avoid capital gains taxes after selling my home,by buying a rv with the preponderance of those proceeds, and how soon would I have to do so before penalty, any clues?

Cheryl,
Under current law, you can avoid capital gains on the sale of your home up to $500,000 "profit" for a couple ($250,000 single) as long as certain "ownership and use tests" are met. You must have owned the home at least two years and lived in the home as your "main" home for 2 out of the last five years. Also, you cannot have taken the capital gain exclusion on another home within the two years prior to the home sale. Those are the general requirements, but there are some other provisions related to any business use of the home. See IRS Pub 523: http://www.irs.gov/publications/p523/index.html

Buying an RV has nothing to do with avoiding capital gains on the sale of a home. There used to be a requirement to "reinvest" home sale proceeds to defer capital gains, but those laws were re-written several years ago.

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