Mobile home park owners are often surprised by how large their tax bill can be when they sell. Between federal capital gains tax, depreciation recapture, and state taxes, a park owner selling for a significant gain can owe 30–40% of their profit to taxes. Understanding these numbers before you sell — not after — gives you time to plan strategies that can dramatically reduce what you owe.
Long-Term Capital Gains Tax
If you have owned the park for more than one year, the gain on sale is taxed at long-term capital gains rates: 0%, 15%, or 20% depending on your total income. High-income taxpayers also owe the 3.8% Net Investment Income Tax (NIIT), bringing the effective federal rate to 23.8% on the gain. Most park owners selling for a significant profit will be in the 20% + 3.8% bracket.
Depreciation Recapture: The Often-Overlooked Tax
This is where most sellers get surprised. Any depreciation you have taken on the property over the years must be "recaptured" and taxed at 25% when you sell. If you depreciated the park improvements at $80,000/year for 20 years, you have $1.6 million of accumulated depreciation that gets taxed at 25% = $400,000 owed regardless of your capital gain rate. This is separate from capital gains and often exceeds it for long-time owners.
Talk to a CPA before signing anything. The tax implications of a mobile home park sale are complex and highly dependent on your individual situation — depreciation taken, your income level, state taxes, and any offsetting losses. A CPA specializing in commercial real estate can model your tax bill before you commit to a sale price.
The 1031 Exchange: Defer Your Tax Bill
A 1031 exchange allows you to sell your mobile home park and reinvest the proceeds into a "like-kind" replacement property without paying capital gains or depreciation recapture taxes — yet. The tax is deferred, not eliminated, but deferral can be indefinite across multiple 1031 exchanges. Key rules: you must identify a replacement property within 45 days of closing and close on it within 180 days; the replacement property must be of equal or greater value; you must use a qualified intermediary (QI).
Installment Sales
Selling on an installment basis (seller financing) allows you to spread your gain recognition over multiple tax years, potentially keeping you in lower tax brackets each year. This only works if you are willing and able to act as the bank — accepting payments over time rather than a lump sum at closing.
Cash sale with flexible timing
We can work with your tax planning timeline. Get your offer first, then plan.
Request a Cash Offer →Frequently Asked Questions
How much tax will I owe when I sell my mobile home park?
It depends on your gain, depreciation taken, income level, and state. A rough estimate for high-income sellers: 20% federal capital gains + 3.8% NIIT + 25% on depreciation recapture + state taxes. Total effective rate on the full gain can reach 30–40%. Run the numbers with a CPA before committing to a price.
What is depreciation recapture?
When you sell a property, the IRS taxes the depreciation deductions you took at a rate of 25%. If you've owned a park for 20 years and taken $1.5M in depreciation, you owe $375,000 in depreciation recapture tax at closing — regardless of your capital gain rate.
Can I do a 1031 exchange with a mobile home park?
Yes. Mobile home parks qualify as like-kind real property for 1031 exchange purposes. You can exchange into another park, commercial property, apartment complex, or other investment real estate. You must identify the replacement within 45 days and close within 180 days.
Does selling to a cash buyer affect my taxes?
No — the tax treatment depends on how long you've owned the property and your basis, not on whether the buyer pays cash or uses financing. A cash sale may close faster, which could matter for timing a 1031 exchange or year-end tax planning.