Modular homeowners enjoy the same tax breaks as every other homeowner; in the eyes of the IRS, a home is any structure that has cooking facilities, a toilet, and a place to sleep. It can be a condominium, a mobile home, or even a boat or house trailer.
If you own a manufactured or mobile home, you are also eligible for many of the same tax breaks as homeowners, even if you’re only renting the land on which your home is currently situated.
Mortgage Interest Deduction
You’re most important tax benefit from homeownership typically comes from the interest you pay on your mortgage. A loan used to purchase any type of home is counted as a mortgage by the IRS, as long as that loan is secured by the home itself. When a loan is secured by a home, it means that the bank has the right to repossess the home if you don’t make your loan payments.
If you pay for your mobile home with a credit card or unsecured bank loan, however, then you cannot deduct your loan interest. An unsecured loan means that you haven’t offered the bank the right to repossess a specific piece of property if you fail to pay the loan as agreed. During the early days of a mortgage loan, the majority of your monthly payment consists of interest.
This means that during the first few years that you’re paying your mortgage, the amount of interest you can deduct from your taxable income is higher. If you paid “points” to lower the interest rate on your mortgage, those are also deductible during the year in which you paid them.
Energy Tax Credits
As a homeowner, you can add energy-saving systems, such as solar panels or certified solar hot water heaters, and get a tax credit of 30 percent of what you spent. In sunny Texas, solar panels are an increasingly popular home improvement.
This tax credit, previously scheduled to end on December 31, 2016, has now been extended to the end of 2019. It decreases to 26% in 2020 and 22% for tax year 2021. Other tax credits that apply only through 2016 cover 10% of what you spend on various kinds of energy-saving appliances and building improvements.
You apply for these credits by filling out IRS form 5695 with your income tax return. You can find this form here, ready to print out, together with all the instructions you need.
Property Tax Savings
If you own a manufactured or mobile home, you may not be the owner of the land on which your home is currently placed. However, in many regions you still pay property tax on the value of the structure itself.
Owners of modular homes also own and pay property taxes on the property beneath their homes, since modular homes are not movable. Any property tax that you pay can be deducted from your income if you itemize deductions.
Many Texas homeowners find that tax breaks by buying modular homes substantially add to their family’s financial health.