Tax Season for Mobile Home Buyers and Owners: Questions to Ask Your Tax Preparer
What a manufactured home means for your taxes depends on three things: whether the home is classified as real property or personal property, whether you own the land under it, and which state it is in. Two neighbors with similar homes can get different bills and have different questions at tax time.
Santiago Financial, Inc. works in manufactured home financing, not tax preparation, so this article does not tell you what you can deduct. It sets out which questions to take to a tax professional, why the answers vary, and which records to keep so that the answers can be found. It is general information, not tax or legal advice.
How the home is classified decides which bills you get
A manufactured home is personal property when it is titled on its own, the way a vehicle is. It is real property when it has been permanently attached to land its owner also holds and that change has been recorded with the county. Personal property vs. real property explains how to tell which one you have. The classification also decides who taxes the home.
Who bills the home, by state and setup
| Your setup | California | Arizona |
|---|---|---|
| Home titled on its own, on a rented space or on land | County property tax, or an annual license fee paid to HCD, depending on when the home was first sold new | Generally assessed by the county as personal property |
| Home permanently attached to land you own and recorded as real property | Taxed with the land as real property | Assessed with the land as real property |
In California the dividing line is a date. A home first sold new on or after July 1, 1980 is subject to local property tax. An older home generally pays an annual license fee to HCD (the Department of Housing and Community Development) instead, unless an owner has converted it to local property tax, and a conversion cannot be reversed. The State Board of Equalization’s manufactured home FAQ sets this out. Your registration or your tax bill shows which system your home is in.
In Arizona, a home that still has a title from the MVD (ADOT’s Motor Vehicle Division) is generally assessed as personal property. When the owner of the home also owns the land, recording an Affidavit of Affixture generally changes that, and the home is then assessed with the land. The county assessor sets the value and the county treasurer sends the bill. ADOT’s mobile home page and your county assessor’s office describe the current procedure.
In both states, space rent, the monthly rent for the lot in a community, is paid to the community and not to a tax authority. It does not appear on any of these bills.
What the IRS publications say, and where they stop
Three IRS publications cover most of what homeowners ask about. Each one names mobile homes, which answers the first worry people have: a manufactured home is not shut out of the homeowner rules because of what it is.
Where the IRS addresses homes like yours
| Publication | Subject | What it says about mobile homes |
|---|---|---|
| Publication 936 | Home mortgage interest | Lists a mobile home among the property that can count as a home if it has sleeping, cooking and toilet facilities |
| Publication 530 | Tax information for homeowners | Includes a mobile home in its description of a home |
| Publication 523 | Selling your home | Says a mobile home may be a main home |
Being named is only the start. Publication 936 also requires that the loan be a secured debt, meaning the home is security for the loan under an agreement that has been recorded or otherwise perfected under state law, and that you itemize your deductions. Limits and thresholds change from one tax year to the next.
Whether any of it helps you depends on your loan documents, your other deductions and the tax year. That is why the rest of this article is questions and not answers.
Questions to take to your tax preparer
What to ask, and why the answer depends on your setup
| Ask your tax preparer | Why the answer varies |
|---|---|
| Does the interest on my loan count as home mortgage interest? | It turns on whether the loan is secured by the home, whether the home is your main or second home, and whether you itemize. |
| Is what I pay on the home each year a deductible tax? | A county property tax bill, an HCD license fee and a registration fee are different charges, and they are not all treated alike. |
| Does anything I pay the community matter for my return? | Space rent is rent. Some communities bill utilities or other charges on the same statement. |
| I bought this year. Which closing figures matter? | Property tax is usually split between buyer and seller, and some costs become part of what you paid for the home. |
| I refinanced or took cash out. What changes? | Publication 936 ties the treatment of interest to what the borrowed money was used for. |
| I made improvements. Do they count for anything? | Publication 523 separates improvements, which can add to your basis, from repairs, which generally do not. |
| I sold the home. Is the gain taxable? | It depends on whether it was your main home, how long you owned and lived in it, and your basis. |
Bring the documents along with the questions. For interest, that is Form 1098, the statement a lender sends showing the mortgage interest it received from you during the year. The IRS instructions for Form 1098 count a manufactured home as real property for that form when it has at least 400 square feet of living space and is more than 102 inches wide, so a home-only loan can produce a Form 1098 as well. If you do not receive one, ask your loan servicer for a year-end interest statement.
Records to keep through the year
A lot of tax-time trouble comes from missing paper, not from complicated rules. A single folder, added to as things arrive, prevents most of it.
Keep these for as long as you own the home, not only until you file. Basis is the figure used to work out a gain when you sell. It starts with what you paid and grows with the improvements you can document, and Publication 523 lists the kinds of work that count. The receipt for a roof replaced long before a sale still has a job to do.
The same file helps on the financing side. If you later look at refinancing a manufactured home, or sell to a buyer who needs a loan, several of these documents will be asked for again.
If you bought, refinanced or sold during the year
A year with a transaction in it has more paper, and a few things that are often missed.
- You bought. The closing statement shows how property tax was split with the seller. In California, a home on local property tax can also receive a supplemental tax bill after a change of ownership, separate from the regular one. California’s homeowners’ exemption depends on owning and occupying the home as your principal residence on January 1, and the claim is filed with the county assessor.
- You refinanced. You may get interest statements from two servicers for the same year. Keep the new closing statement, and if you took cash out, keep a record of what the money was spent on.
- You sold. Gather the closing statements from the purchase and the sale and your improvement receipts before you meet your preparer.
Which side of January 1 a closing falls on can matter too. Buying at the end of the year covers the property tax calendar in both states.
Your tax return is also a loan document
There is one place where taxes and financing meet directly. When you apply for a loan, a lender may ask for your recent tax returns and W-2s. If you are self-employed, your return is the main evidence of your income, and the lender reads what was left after business expenses, not what came in.
How self-employed income is documented walks through what a lender takes from each form.
