NC's new tax law to increase typical mobile home by more than $2,000

jmurawski@newsobserver.comDecember 27, 2013 

Buying a mobile home in North Carolina can be a considerable financial layout for low-income home buyers, and the investment will soon go up by several thousand dollars.

Changes in the state’s tax law enacted this summer will increase the sales tax for mobile homes on Jan. 1 from 2 percent to 4.75 percent. But in reality, the increase for most people will be about fivefold. That’s because North Carolina’s mobile home tax is capped, and most mobile home buyers effectively have been paying a sales tax far below 2 percent for years.

The tax change is already being phased in for mobile home sales around the state. Mobile home sales expected to finalize in January got underway weeks ago, and are being quoted the higher tax rate that will be in effect when the deals close, said Sonny Bannister, owner of Royal Homes in Raleigh.

“People don’t like it, but they learn how to live with it,” Bannister said. “It’s just another stone getting hurled in our direction.”

The change is one of many provisions in North Carolina’s complex tax package that cuts the personal income tax, increases the personal tax exemption and cuts the corporate income tax.

The tax on mobile and modular homes is being brought into line with the state’s general sales tax; lawmakers who created the law saw the change as eliminating a longstanding loophole for mobile homes.

Still, the N.C. Manufactured and Modular Homebuilders Association is talking to lawmakers about lowering the sales tax during the 2014 legislative session.

For the beleaguered industry, the higher tax is another setback. Mobile home sales have been plummeting nationwide, and are down about 90 percent over the past four decades. In 2012, fewer than 55,000 mobile homes sold nationally, including just 2,287 in North Carolina.

Royal Homes in Raleigh sells between 24 and 36 mobile and modular homes a year. Royal Homes’ prices are in line with national averages – $40,600 for a single wide and $74,200 for a double wide, Bannister said.

Customers typically have household incomes between $24,000 and $72,000 a year, he said. Some buy them as rental investments.

Bannister said most of his customers have to finance their homes and the cost of the tax will be spread out over a 15- or 20-year mortgage.

The mobile home tax now is capped at $300 for single-wides and $600 for double-wides. Starting Jan. 1, the sales tax on a $40,600 mobile home will be $1,928.50; the sales tax on a $74,200 mobile home will be $3,524.50.

“It’s a substantial increase, there’s no doubt about it,” said Brad Lovin, executive director of the N.C. Manufactured and Modular Homebuilders Association. “It’s already a struggling market, so this certainly is going to hurt some.”

About three weeks ago, Bannister said, a Royal Homes customer paid cash for a $52,000 single-wide in Clayton, and wanted to expedite the deal this year to lock in at the lower tax rate.

“We had to call in all our favors with the factory to have it made expeditiously,” he said.

If the deal had spilled over into 2014, the customer’s tax bill would have been $2,470.

Instead, she paid $300.

Murawski: 919-829-8932

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