Claudia Rutherford’s $750,000 home has plenty of luxury items—a spacious living area with leather sofas, a gourmet kitchen, and three-zone air conditioning.
It also has four wheels and a 600-horsepower diesel engine. That is because Mrs. Rutherford, 67, and her husband, Jack, 73, live in a 45-foot-long American Eagle Heritage Edition motor coach from American Coach.
The couple sold their 39-acre farm in Perkasie, Pa., in November 2020, downsizing from a five-bedroom home to pursue full-time RV life. And they are not alone.
According to an owner demographic profile published in March 2021 by the RV Industry Association, a trade group, there were 11.2 million RV-owning households in the United States, up 26% over the 8.9 million in 2011. About 400,000 RV owners today are considered full-time RVers. The median age of an RV owner is 53, 70% are married, and 29% have an annual income in excess of $100,000, according to the RVIA.
But those who adopt a nomadic lifestyle face multiple legal and financial considerations, the most important of which is the selection of a domicile.
“That can have significant legal ramifications,” said Martin M. Shenkman, an attorney and certified public accountant in Fort Lee, N.J. “Domicile can affect a wide range of legal rights, from income taxes to estate planning and matrimonial law.”
Domicile is defined as the place you intend to live and ultimately return to permanently. A person can have multiple residences but only one legal domicile.
“A lot of people just count how many days they’re in the old jurisdiction and go through checklists from the internet that tell them to change their driver’s license and get a library card, but it’s not enough,” Mr. Shenkman said. “You need to show intent to change your domicile.”
Some RVers may opt to hold on to their homes, so a change in domicile may not be necessary. Mr. Shenkman noted that keeping your own home might make it difficult for someone to successfully claim they changed their domicile to a different town or state since their intent seems to show a permanent connection to their old location. However, those who prefer to travel without a permanent base of operations still need a legal domicile in which to register their vehicles, acquire a driver’s license, vote, and, possibly, pay taxes.
Because they lack state income taxes, Florida and Texas are popular states for full-time RVers to establish domicile. But selecting a state-based only on taxes can lead to disastrous results. Texas, for example, is a community-property state in which all marital assets are jointly owned and split equally in the event of a divorce. On the other hand, Florida follows the rule of equitable distribution, which can lead to a very different asset split. State laws affect estate planning and investment planning as well and vary considerably. So the correct choice of domicile is key.
Paying for the vehicle is another issue RV purchasers face. “Houses tend to go up in value over time, whereas RVs go down in value,” said Todd Minear, a certified financial planner in Liberty, Mo., who has a 32-foot Class C RV he uses for vacations. “A person who goes out and buys a brand-new RV can take a 20% hit once they drive it off the lot.” That is why he recommends paying cash for the RV unless the buyer gets a low-interest rate and then invests the money he would have spent on the RV in the hope of achieving a higher after-tax rate of return. “Financing may be right for that person,” he said. “But if the person is risk-averse, it makes more sense to purchase outright.”
For those who plan to finance their purchase, RV loans are readily available, said Michael Lax, an executive vice president at Bank of the West, an RV lender. Terms up to 20 years are available, and the principal can range from $10,000 to $1 million or more. Interest on the loan may be deductible if the RV is a first or second home, has sleeping, cooking, and toilet facilities, and otherwise meets IRS requirements for qualified home mortgage interest.
Here are some things to consider if you’re interested in pursuing a full-time RV lifestyle.
If you plan to change your legal domicile, you’ll file a final tax return as a state resident in your old state. For example, New York state’s nonresident and part-year resident income tax form has a box for the date you moved out of the state. That is a red flag for state taxing authorities to let them know you claim to no longer be a resident, Mr. Shenkman said. If you are audited, make sure you have documentation to support your change of domicile—more than just a new voter’s registration card or driver’s license. When Mr. Shenkman, who now lives in New York, previously moved from New Jersey to Connecticut, he took photos of local events and visits with friends in his new state to prove he was there. He also kept a diary on his laptop, noting where he was and what he was doing on a particular date. That contemporaneous record detailing his whereabouts would help support his claim of a new domicile if he were ever audited, he said.
Consult the right experts
Mr. Shenkman suggests that those considering becoming full-time RVers and who wish to change domicile consult with an attorney, a financial adviser, and an accountant specializing in state and local taxation. They need to ensure they properly sever domicile with their old jurisdiction and establish a new domicile in their new location or state. A financial planner may need to adjust your municipal bond portfolio or re-evaluate your cost of living, and an attorney can determine whether the change of domicile affects your marital rights or estate planning.
Don’t under-budget
Many people think they will save money by selling their home and living in an RV full time, but that depends on your lifestyle. “If you go to Florida and stay in a waterfront RV resort, that’s going to be very expensive compared to visiting national parks and doing primitive camping with a generator or solar panels,” said Mr. Minear. Mrs. Rutherford said her expenses average $5,000 per month, including the cost of financing and gas. She said that while a luxury RV resort may cost $105 a night, she no longer has to pay property taxes or homeowners insurance on their former farm, so she and her husband, who are still legally domiciled in Pennsylvania, are saving money as full-time RVers.
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