The average capital tax range for mobile homes can be as high as 20-37% tax rate PLUS sales tax. If this isn’t paid the IRS could seek criminal charges.
What many do not know is that it can be 0% if the mobile home is donated.
Usually, the amount mobile home owners have to pay depends on two factors: Your state and the type of manufactured home.
Since sales tax regulations can be extremely difficult to get a grasp of, we’ll make it easy for you in this article. You’ll get the guidance you need to determine the exact fees you will be charged for the sale of your mobile home, plus a great way to completely avoid sales tax on your manufactured home.
Let’s get into it.
How are Manufactured Homes Taxed?
If you are selling a manufactured or mobile home, there are two taxes for you to pay attention to:
- Sales tax or use tax during the resale or sale of the mobile home
- The annual local property tax or the annual vehicle license fee, depending on state laws and manufactured home classification (vehicle or home)
As the seller, you can collect the sales tax of the manufactured home at the moment of the transaction. But if your state doesn’t allow the seller to collect the taxes directly, you can factor it into the cost of the property. You have to make sure this is completely transparent to the buyer.
Taxes on Personal Property Mobile Homes
Your mobile home can be defined as personal property if it isn’t permanently situated on the land it stands on (that is, the home can be moved) and you don’t own that land. For example, the ones in mobile home parks. In this case, the land is taxed separately from the mobile home. You have to pay sales and use tax during the sale of personal property.
On the other hand, if you own the land plus the mobile home on it, then it’d be called real estate.
The mobile home park landowner handles the tax for the land. Most times, they’ll include the taxes in the rent costs. But, hey, make sure you verify with the landowner or your state’s official website who is responsible for the taxes.
You wouldn’t want to assume you’re not responsible and have the IRS be the one to inform you.
Note: If your mobile home was converted to “real property” at some point and now it has to be moved, then you have to convert it back to “personal property”. Because you can’t move the land beneath it. It usually involves a long process but it’s what needs to be done.
Taxes on Real Property Mobile Homes
Real property or real estate property manufactured homes, by definition, are the opposite of personal property manufactured homes. Real property mobile homes are those that have been permanently fixed to the land which the homeowner owns.
If the home is titled as a real estate property, you’ll have to pay a real estate transfer tax. And if you make profits on the sale of the home, then you have to pay capital gains tax too. In summary, as the homeowner and landowner, you have to pay capital gains tax assuming you’re selling them together.
And yet again, this all depends on what state you’re in. Because there are states that don’t levy transfer taxes on real estate.
Cases in point: In Alaska, Delaware, Oregon, Montana, and New Hampshire, owners of real property manufactured homes either don’t have to pay transfer taxes or pay very low fees.
Cases of Tax Exemptions for Manufactured Homes
Just as in most tax exemptions, there are certain eligibility requirements. For instance,
- People with disabilities
- Military veterans
- Homestead exemptions; and
- Senior citizens
If you don’t qualify for any of these, keep reading because there are more opportunities for deductibles or tax breaks that you can get.
1. Energy-efficient renovations deductible
There are tax breaks or credits for energy-efficient improvements or renovations on manufactured homes. If you’d like to know the specific steps to follow to qualify for these tax exemptions or reductions, you can visit your state government’s official website.
Note that tax exemptions and reductions aren’t automatically applied or offered. So, you have to check for the ones available in your state and send in your application if you qualify. Go for it to get it.
2. Loan interest deductible
Your ability to deduct loan interest from your taxes is still another possibility. If you paid the interest on your manufactured home loan in the previous year, just like with traditional mortgages, you can submit a claim for a tax credit or break.
This, however, only applies when your debt isn’t more than $500K when filing as an individual, or $1M if you’re filing jointly with your spouse, plus an additional $100K in home equity debt.
And it doesn’t even matter what kind of loan you took out to purchase or renovate the home. The interest can be written off as long as the home was used to secure the loan. The IRS Tax Topic 505 goes into the fine details.
3. Buy-down point cost deductible
Another means through which you can claim tax deductions is buy-down points. If you’re taking a loan to buy a manufactured home, buying points is a smart direction to go. Why?
- Buying points reduce the interest rate of the loan until it’s paid off
- You can deduct the cost of points and the amount you paid in interest from your tax
If you have bought points, the next step is to apply for the deduction.
4. Sales tax deduction
To qualify, you need to have lived in the manufactured home for at least two years before you decide to sell it. When you do, you can skip the capital gains taxes on profits of up to $250K. It’s double that for spouses.
5. Property tax deduction
This tax deduction allows you to deduct the state and local taxes you’ve paid on your property from your federal income taxes. Courtesy of the IRS.
Key Takeaways
As manufactured homes are usually subject to sales taxes in most states, asking for eligibility for tax exemptions will go a long way in easing the strain on your pockets.
To figure out how much taxes you have to pay, first find out what type of manufactured home you own or intend to buy. With that information, consult with a property lawyer or research your state’s laws and regulations on manufactured home taxes.
Sometimes you may find that you’re not eligible for exemptions and the taxes are too much to pay. But there’s one other option. If the mobile home isn’t one you use frequently, you can completely avoid sales tax by donating your mobile home.
That way, you don’t have to pay a lot of money to hold on to a property you don’t use frequently. Instead, you can help someone in need and benefit from it at the same time.
Sounds interesting? Contact us for details. We’ll help you give your mobile home to the right family and take it off your land for free.