Does the primary residence tax exemption apply to mobile homes?

Question

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?

Bob Norton · Answer

@Michael Plaks The procedure I described is specific to IL where @Marcus Brown lives. There is some version of it in each state that I've checked.

Bob Norton · Answer

@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.

Michael Plaks · Answer

@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.

Michael Plaks · Answer

@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.

Ashish Acharya · Answer

Yes it does.

Simonna Cabantog · Answer

Yes, it would qualify for an exemption of $250,000 for single filer and $500,000 for joint.

John Teachout · Answer

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.

Michael Plaks · Answer

@Bob Norton

I do not think that the procedure you're describing is universal across the country

Bob Norton · Answer

@Marcus Brown Yes. Generally a mobile home that is attached to the land has a fixed foundation and the wheels have been removed. The affidavit just confirms that your intent is to make it an improvement to the land.

Marcus Brown · Answer

@Bob Norton so is this what it means when a mobile home is "attached" to land? I've heard that term a lot but never knew if there was an actual distinction.

Does the primary residence tax exemption apply to mobile homes?

Does the primary residence tax exemption apply to mobile homes?

Most Popular Reply

11 Replies