Does the primary residence tax exemption apply to mobile homes?

11 Replies

Let's say I buy land and put a mobile home on it and live there 2 years, then sell for a profit. If the mobile home is considered personal property would the profits be taxed?

Originally posted by @Marcus Brown :

Let's say I buy land and put a mobile home on it and live there 2 years, then sell for a profit. If the mobile home is considered personal property would the profits be taxed?

Yes it does. 

 

@Marcus Brown

One thing to consider is whether you own or down own the land below the mobile home.

If you don't own the land itself, the ability for the property to appreciate will be limited.
If the ability to appreciate is limited, the exclusion of section 121 is available but I think less attractive.

@Marcus Brown

It can get complicated if you owned the land for some time, let it appreciate in value, and then put a mobile home on it and moved into it for 2 years. In this case, you tax exclusion will only be partial.

If you immediately made the property your residence, and all appreciation happened while you lived on the property, then most likely you can avoid taxes, subject to some additional conditions, such as no other sale of residence within 2 years.

@Marcus Brown

In my earlier reply, I failed to consider the point that you brought up: does a mobile home qualify for the purposes of the capital gain exclusion under Section 121 of the Internal Revenue Code?  

This is also complicated, and I give you thumbs up for being aware of a possible trap here. Under Regulations 1.121,

"A property used by the taxpayer as the taxpayer's residence may include a houseboat, a house trailer, or the house or apartment that the taxpayer is entitled to occupy as a tenant-stockholder in a cooperative housing corporation (as those terms are defined in section 216(b)(1) and (2)). Property used by the taxpayer as the taxpayer's residence does not include personal property that is not a fixture under local law."

Interpretation: while generally mobile homes can qualify, they will NOT qualify if the local law considers them personal rather than real property. You sometimes have to look into the manner in which the home is installed and other factors. So you would need to carefully consider your local laws.

@Marcus Brown You should file an Affidavit of Affixation with your county to convert the mobile home to real estate.  Then, there will be no doubt that your mobile home is a primary residence and that you qualify for the tax exclusion under Sec 121.

Affixing a mobile home is more related to a paperwork process than the actual way it is sited. A mobile home can be on a concrete foundation and either be "attached" or "not attached". When buying a mobile, determining the status is often a challenge as it seems records tend to not be maintained very well. If it's NOT attached, then there needs to be a title for the mobile. If the county/city is taxing the property and listing the mobile as a taxable structure/improvement, that's an indication it's attached.