Capital Gains Tax and manufactured homes
Posted date : Nov 4, 2017.
Dear Bird Talk,
In your winter 2014, Issue 93, you advised Linda Johnson of Vancouver B.C. that the sale of her current home “would be subject to capital gains tax on the difference between the sale price and the purchase price you paid, less improvements. Ten per cent of the sale price is required to be sent to the IRS and you each have to file a U.S. tax return.”
Capital gains I can understand, but the requirement to send 10% of the sale price to the IRS confuses me. What is this tax for and, if it is a requirement, what form would be used to report it?
My wife and I purchased a manufactured home in Florida last year. We pay for land rental in a park. When we transferred the home to our names, we paid seven per cent tax to the State of Florida and, each year, we pay to renew the tag. An additional 10 per cent tax (total of 17 per cent) would make this a very expensive transaction when the time comes to sell in the future.
I believe that a manufactured home is classified as personal property, not real property. Does the capital gains tax apply to manufactured homes?
Ed.: Capital gains tax applies to any asset that you sell for a profit, including manufactured homes. You deduct the purchase price and any bills which you have for improvements and the balance is what is taxed. Make sure that you save every bill related to your home, forever. The 10% tax you speak of is what is called a withholding tax. This is almost always fully refundable when you file your taxes.