Inherited property comes with both emotional and financial challenges. This makes the process of inheriting a mobile home a blessing and a curse.
For example, many beneficiaries are often uncertain of how tax on a sale of an inherited mobile home works. This can cause stress about what to do with the inherited property, and how to factor in taxes.
In this post, we’ll give you the information you need to understand the different types of taxes associated with an inherited property. We will also discuss why donating your inherited mobile home can be a wise option.
Inherited Mobile Homes: Tax Considerations
Understanding that the inherited mobile home’s sale will only be taxable if it generates profits is one way to decode tax in this context. If the sale comes with a loss of money, the mobile homeowner will in turn benefit from a tax deduction. It’s worth mentioning that the estate tax is not applicable in this case.
The estate tax is a tax on the right to transfer property at your death. Since beneficiaries must pay this type of tax before distributing assets, they won’t have to pay the estate tax.
There are also a couple of different options for taking care of your inherited mobile home other than selling it. If you’d prefer to not live in a mobile home and rather it went to a good cause, you can donate the property and receive a tax write-off. This way, you’d be able to commemorate your loved one all while supporting a charity and families in need.
Deductions on the Capital Gains Tax
We’ve mentioned that the beneficiaries of the manufactured home will have to pay tax if they profit from the sale. Subsequently, if the beneficiaries lose money on the sale, they are entitled to get tax deductions as well.
Should the beneficiaries move into the mobile home they inherited, it becomes personal property and they could lose the tax benefit. The tax deduction in case of a loss of money only applies if the beneficiaries never move into the mobile home they inherited.
This is important to know if you decide to make your inherited property your primary home because you won’t be entitled to the tax deduction and risk losing tax benefits.
There are certain advantages to waiting a year before selling your inherited manufactured home as well. The main reason behind waiting before selling is to get the lowest tax rates. After a year, the mobile home is considered a long-term capital gain, so the maximum tax rate should be around 15%.
Additional Taxes on an Inherited Manufactured Home Sale
It’s important we address inheritance tax as it has a significant impact on inherited property.
The inheritance tax is a state tax, meaning that it must be paid after assets are distributed.
Most states don’t have inheritance tax with the exception of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Another key piece of information is that the inheritance tax doesn’t apply anywhere in the U.S., if the beneficiary is the deceased’s spouse. If the beneficiary is the child, then he/she will be exempt in all states except Nebraska and Pennsylvania.
The estate tax is another additional tax that exists on an inherited manufactured home. Unless the beneficiaries inherit property, assets, or money of more than $1 million in value, this tax shouldn’t be applicable.
Tax Exemptions and Deductions on Your Mobile Home’s Sale
The home sale tax exclusion is the most generous tax deduction. The crucial bit of information to remember is that if the beneficiaries also lived in the mobile home as their primary residence for 2 years during a 5-year period ending on the day of the sale, they could exclude up to $250,000 of the gain on the sale, if they are eligible.
You might decide to wait and make some improvements on your inherited home before you sell or donate it. This is a wise idea because you can also receive a deduction on taxes for home improvements. If you perform any home repairs before selling your inherited mobile home, those costs will adjust the basis of your tax gain, thereby reducing the overall tax burden.
This is a really great way to look at tax advantages. So, if you’re on the fence whether or not you should go ahead and make home repairs, keep in mind that the money you invest in making these improvements is actually a good way to make more profit long-term.
Conclusion
How much tax money you owe on your inherited property and whether or not you have to pay taxes at all, depends mostly on the profit you make from selling your manufactured home.
In this post, we’ve talked about different ways to decrease taxes or get tax exemptions.
Since the criteria for tax deduction eligibility depend on each case, we at Banyan highly recommend that mobile homeowners consult a lawyer. While we can give you information on the subject of tax on a sale of an inherited mobile home, we cannot provide legal or tax advice.
Sometimes, the tax laws and regulations can be overwhelming and leave you more confused than ever. Your inherited home can become a burden and you might look for easier ways to resolve this issue and come to a quick solution that doesn’t involve spending hours and hours going through endless paperwork.
Donating a mobile home is a valuable option because you’d be getting a tax write-off. In such case, donation should be a viable solution seeing how you’d get to enjoy benefits equal to the value of the home, like a tax rebate. You’d also be doing a good deed by helping those who need support.
If you choose to donate, Banyan Mobile Home Removal can help you give your mobile home to the right family and take it off your land for free. Contact us via phone call or email and we’ll pick it up and take it away at zero cost.