Wednesday, April 16, 2014

RV tax

Dear Dr. R.V. Shrink:
We are about to spend ten times more on a new motorhome than our first house cost forty years ago. It makes me a little uneasy to spend this kind of money on a vehicle that will be traveling down the road depreciating. It has always been my husband’s dream. It sounds appealing to me so I am throwing caution to the wind and sailing away with him. However, he is trying to penny pinch on taxes using what I would call borderline legal schemes and dishonest practices. He has been looking into setting up a Montana LLC. We live in Ohio. He says it would cost us about twelve hundred dollars and save us thousands. Then he talked to a friend that never renews his license plates. The theory is: pay the fine instead of the tax. I have been very supportive of this new lifestyle but my husband is upset because I won’t go along with the tax cheating. Am I being too closed minded? Are others doing this? Is it legal?
--Honest Abby in Akron

Dear Abby:
Yes, others are doing this. Many are very nervous now because various states have caught on to the practice and are now pursuing these folks for back taxes and penalties. As for the plate renewal I would think that would catch up to you very quickly in this age of computer data. I would assume law enforcement could run your plate for various reasons on the fly in any state and know immediately that you are running on expired plates. If you are heading out on a grand adventure, spending big bucks for a new home on wheels, and looking forward to a relaxing lifestyle, do you really want to be looking over your shoulder all the time wondering if someone is after you? You have to pay to play. My suggestion would be to follow the rules and travel worry free. If, however, you sell your property in Ohio and change your residency to a state with little or no sales tax, you can enjoy that savings without fear of prosecution. Many people who are full-timers use services available in states like South Dakota to establish residency, mail forwarding service, and taxes. Taxes are a necessary evil. I was an accountant in the Marine Corps, so if you want to know where your taxes go, just ask me. If you want to use Military accounting practices to save money, just start at the bottom line with what you want back and work up.
--Keep Smilin’, Dr. R.V. Shrink

8 comments:

Anonymous said...

If your plates are expired, your insurance would be invalid...

Anonymous said...

I was at a upscale Rv park last weekend and was shocked to see the number of high end motorhomes with Montana plates. It really upsets me that they are saving tens of thousands of dollars on taxes which people like me then have to pay to make up. I didn't like spending $13k on taxes for my motorhome but I feel it was the right thing to do.

Ellen said...

If you can afford an expensive rig, but you're sweating the taxes and license fees for owning it, you're in for a shattering wake-up call when you hit the road. The rig will break in some way and you'll be up to your eyeballs in repair fees. The spots you'll need to reserve to park your rig will cost you a pretty penny. Just fueling it up could max out most credit cards.

Think about it. If you're watching your nickels and dimes now, what does your future look like with this rig?

Maybe you should think about a smaller, more affordable RV.

Or tell hubby to man up, pay his fair share. His taxes help pay for the roads he expects to travel, the rest areas he hopes will be open when he needs to stop along the way, and the emergency services we all hope are never needed.

Anonymous said...

Shrink has offered a partial answer and some information, especially in re: accountants. The fact is savvy individuals and companies employ tax accountants and attorneys in order to pay as little in taxes as possible, not to break the law, but to operate within the law, and take advantage of every way to reduce taxes. Consult a Montana attorney who is a specialist in this field, learn the right way to do this LEGALLY, I have, as have many thousands of others. There are requirements, and the trouble to do this the right way, has been worth MANY thousands of $ to me and many I know, and if your rig reaches 10 years of age, you may purchase a "permanent" lic. plate, for a small fee which NEVER needs to be renewed! Smart people do not break the law, they USE it to their advantage. I chose to have my Sig. rebuilt and made new, since it is better than most any coach for sale today, and I save thousands in fees. It is foolish to attempt to brand wise folks as cheaters, better to get the facts, and learn how to save $ yourself.

B Smith said...

As for all, the people who have joined in here saying, "That he should pay his fair share" well when the game is fair for all maybe!
I know my cousin has used a Montana company for years! There are no plate renewals, you get your insurance through a local (Montana) provider that is much cheaper than here in NY, and he used it for not just his Motorhome but all his vehicles and trailers. So yes, people use this and can save a lot of money just as all the big wigs do!
Yes there are some states that have become hard about it, But so is NY and in over 8 yrs. they have never said anything.
Now to the whole thing (well today with computers they can find you) does not work with Montana as they "do not allow “any other state to contact them and access there dmv records, and i know this again as a fact, most police know this and not even try and run Montana licenses.

Anonymous said...

I always find this discussion about taxes interesting since it seems OK for large corporations e.g. GE, Carnival Cruise Lines et al. to register their vessels, vehicles etc, out of this country in order to avoid the tax burden but if a "little guy" does the same and attempts to avoid a heavy tax burden somehow he becomes a "cheat". As another poster stated, it is nothing but a wise move to keep as much of your own hard earned money as possible. I can assure you that I know how to spend my money better than any government entity ever could and much more wisely.

Anonymous said...

Has it occurred to anyone that taxes are too high and people are protesting the best way they can?

Jeffrey said...

I always snicker when there is the obligatory, 'The taxes are too high' comment in discussions like this. As the saying goes, 'Taxes are the price we pay for Civilization'. Unfortunately, not all taxes are created equal, but that is one of the variables we have to deal with in a collection of States, (NO - I am not advocating a national 'flat tax' as that is something that only benefits the wealthy in my opinion).

I bought my RV in Oregon where there is no sales tax, but had to pay the equivalent sales tax when I registered it here in Washington, to the tune of $5600. It may seem excessive, but my yearly tabs/taxes on a $120k RV is $140, and that is with 'custom' State Parks plates, so after 6 years it has worked out for my family, and my community, in the long run.

Is the use of Montana LLC's or establishing a residency in South Dakota a 'tax dodge'? Yes. But is it wrong? Well... that's a personal, maybe even moral, choice. These are legal options, especially for full-timers, and while it may be a 'dodge' to some it is still an option, though one that takes away from the community you have called home for years. If corporations like GE, Bank of America and Halliburton can pay ZERO income taxes, while the rest of us pay around 30%, I do not blame average Joes for looking for a way to save come April 15th.

That said, trying to skimp on registration, tabs or fuel taxes (using agriculture/green diesel over commercial/red fuel) is absolutely crazy. In an era where traffic cams automatically read your plates and mail you a ticket (or a bill, as happened to me when I stumbled onto a toll road outside Denver), it is not a stretch to imagine the private companies processing the video would send that information to the Treasurer in the state where your rig is registered. You also have the costs associated with the possible towing and impound of your home when you get pulled over for expired tabs by Deputy Billy Joe Bob in Nowhere County, Low Tax State.

Few things are as certain as death and taxes. No matter how much effort you spend trying to avoid them, sooner or later, you have to pay the piper. Paying them, and working to make the system equitable, will give you fewer gray hairs than trying to game the system.