Tax Law Update: Expanded Floor Plan Interest Deduction for Trailers and Campers

The recently passed Reconciliation Bill included an amendment to Internal Revenue Code §163(j). This amendment offers meaningful relief to RV dealerships engaged in the sale of certain trailers and campers. Specifically, the bill expands the definition of floor plan financing indebtedness to include debt used to finance trailers or campers that:

• Are designed to provide temporary living quarters for recreational, camping, or seasonal use, and
• Are designed to be towed by or affixed to a motor vehicle.

This change is significant for dealerships that sell towable RVs, such as fifth-wheel trailers and travel campers, which were previously excluded from the floor plan financing exception unless arguably part of a motor vehicle package. The update ensures that interest on qualifying inventory financing will be fully deductible and not subject to the business interest limitation rules under §163(j).

The amendment applies to tax years beginning after December 31, 2024, with the Treasury granted authority to issue rules for short tax years that span the enactment date.

Key Takeaway

Dealers of towable recreational vehicles should reevaluate their 2025 and forward tax planning strategies. By classifying qualifying trailer inventory debt as floor plan financing, these businesses can ensure full deductibility of interest—potentially avoiding limitations under the 30% adjusted taxable income cap imposed by §163(j). Taxpayers and advisors should monitor IRS guidance to clarify eligibility and compliance in partial-year situations.

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