Today TaxMama hears from Angie in the Tax Parlor who says, “I purchased a manufactured home last year. Is the rent I’m paying on the land deductible in any way? I use Turbo Tax since it is more affordable for me and I don’t see this any where in there.”
Hi Angie,
Nope. Not a cent.
If you were buying it, there’d be a property tax component. Or if this were an association that you were a member of, again, there’d be a property tax component.
But, sorry. Nope. The dirt isn’t yours.
Several years ago, I saw an ad for a remarkably low-priced housing complex not too far away. Visiting the place, the houses were terrific. They were lovely, spacious, had all the modern appliances and conveniences, including a spacious garage with opener – even landscaping included in the price. Very tempting.
But there was a catch.
It was a manufactured home complex – and you don’t own the land. That’s why the price of the house was so low.
Requesting a copy of the land contract, I read that the land-owners pass through all the property taxes to the homeowners. I knew that while they were selling the houses the property taxes were still low. Why? Because our county assessor was three years behind in invoicing for improvements. So the builders were telling the truth about the property taxes – at the moment. They weren’t disclosing that everyone would get a huge bill in three years for three years worth of catch-up assessments + the real property bill, from then on, would be much higher – based on the value of the land after the development. The increase would be something like going from $100 per year per home to about $1000 per year.
And their contract didn’t give the homeowners first option on buying the land when the builders got ready to sell the property. Without that, the homeowners would be hit with a double whammy.
Upon sale, the property would be re-assessed again to the very high sales price. They would get hit with another three years back taxes when the assessor catches up again. Their property tax bill would double – or more. AND they still wouldn’t own the land. The new owner would raise the land rent dramatically as soon as the initial lease period expired – about 5 or 10 years.
Many of the people buying these properties were seniors on fixed incomes. And they didn’t understand what was being done to them. Inevitably, they would either lose their homes or be forced to sell because they wouldn’t be able to afford the property tax hits. And the homes would be harder to sell because the land rents would be much higher – and so would the property taxes.
Most of the news you read about residents of mobile home parks is bad – evictions as the landowners sell the land, re-zoning, etc. That’s what happens when you don’t own the land.
On the other hand, here’s what happens when you do – you become a millionaire when YOU decide to sell. This happened just about a month ago to the folks at Briny Breezes in Florida.
So, read your contracts carefully before you move into a manufactured home community where you don’t own the land.
And remember, you’ll find answers to lots of questions about manufactured homes and other tax information, free. Where? At TaxMama.com
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