How to Calculate Depreciation on a Mobile Home Park: Step-by-Step

By Harry Shurek, EA | The MHP Accountant®

You paid $3.5 million for a mobile home park. Your CPA put the entire purchase price on a single 39-year straight-line depreciation schedule. You are now getting approximately $89,700 in annual depreciation deductions — and leaving a massive amount of tax savings on the table.

The problem is not that depreciation is wrong. The problem is that a mobile home park is not a single asset. It is a collection of components — land improvements, personal property, park-owned homes, and structural real estate — each governed by different MACRS class lives, different depreciation methods, and different conventions. When you collapse all of that into a single bucket, you defer the fastest depreciation to the later years of ownership, exactly when you need it least.

This guide walks you through the mechanics of calculating depreciation on a mobile home park correctly: identifying components, assigning class lives, applying the right method and convention, calculating year-one and subsequent-year amounts, and understanding how bonus depreciation changes the math entirely.

Step 1: Understand That You Are Depreciating Components, Not a Property

The IRS does not ask how much your mobile home park cost. It asks what each depreciable component cost and what class life governs that component. Under the Modified Accelerated Cost Recovery System (MACRS), different assets recover their cost over different periods.

For a typical mobile home park, you will encounter four primary asset categories:

• 5-Year Personal Property: Park-owned homes (POHs) classified as personal property, office furniture, appliances in POHs, certain equipment.
• 15-Year Land Improvements: Roads and paving, utility distribution systems, fencing, landscaping, signage, parking areas, swimming pools, and recreational amenities.
• 27.5-Year Residential Real Property: Residential rental structures that meet the definition of a dwelling unit — applicable if your park includes conventional apartments or permanent residential structures.
• 39-Year Nonresidential Real Property: The office building, maintenance shop, amenity buildings, and other commercial structures.

Land itself is never depreciable. When you buy a mobile home park, you must allocate a portion of the purchase price to land and exclude it from depreciation entirely. There is no MACRS life assigned to land.

Step 2: Assign the Correct Depreciable Basis to Each Component

Depreciable basis starts with purchase price allocation. When you acquire a mobile home park, you should perform a formal cost segregation study or, at minimum, a detailed appraisal that allocates the purchase price among land, buildings, land improvements, and personal property.

For example, on a $3.5 million park acquisition, a cost segregation study might determine:

• Land (non-depreciable): approximately 20% of total value
• 39-year structures (office, maintenance building): approximately 10% of total value
• 27.5-year residential structures (if applicable): varies by park type
• 15-year land improvements (roads, utilities, fencing, amenities): approximately 25–35% of total value
• 5-year personal property (POHs classified as personal property, equipment): approximately 10–20% of total value

These are illustrative ranges only. Your actual allocations depend on the specific park, the age of infrastructure, and the findings of a qualified engineer performing the cost segregation study. The IRS expects the allocation to reflect fair market value supported by documentation.

Step 3: Apply the Correct Depreciation Method for Each Class

Once you know each component’s depreciable basis and MACRS class life, you apply the appropriate depreciation method. MACRS specifies three methods depending on the asset class:

200% Declining Balance (200DB) — applies to 5-year and 7-year property. This is the fastest method. In the first year, you deduct double the straight-line rate. As the deduction shrinks below what straight-line would produce, you automatically switch to straight-line for the remaining recovery period. For 5-year property, the straight-line rate is 20% per year. The 200DB rate starts at 40% of the declining balance.

150% Declining Balance (150DB) — applies to 15-year land improvements. Similar to 200DB but uses 1.5 times the straight-line rate as the starting point. For 15-year property, the straight-line rate is approximately 6.67% per year. The 150DB starting rate is approximately 10% of the declining balance, switching to straight-line when that method yields a higher deduction.

Straight-Line (SL) — applies to 27.5-year residential and 39-year nonresidential real property. Equal deductions in each year of the recovery period, adjusted only for the applicable convention in the first and final year.

Step 4: Apply the Correct Convention

MACRS conventions determine how much depreciation you take in the first and last year. Getting the convention wrong is a common error on MHP returns.

Half-Year Convention: Applies to most personal property (5-year, 7-year). Regardless of when during the year you place the asset in service, you are treated as having placed it in service at the midpoint of the tax year. You receive one-half of a full year’s depreciation in year one and one-half in the final year of the recovery period.

Mid-Quarter Convention: Applies to personal property when more than 40% of all personal property placed in service during the year is placed in service in the last quarter. If your park acquisition closes on October 15 and the POHs represent more than 40% of the year’s personal property additions, the mid-quarter convention may apply, which reduces your first-year deduction on those assets significantly.

Mid-Month Convention: Applies to all real property (27.5-year and 39-year). You are treated as placing the asset in service in the middle of the month in which you actually placed it in service. A park acquired on March 1 receives 9.5 months of depreciation in year one (mid-March through December).

Step 5: Calculate First-Year Depreciation Without Bonus Depreciation

Using illustrative percentages to show the mechanics (not your actual rates — use IRS Publication 946 tables or your tax software for precise rates):

5-Year Personal Property (200DB, Half-Year Convention): IRS MACRS tables show approximately 20% in year one for 5-year property under the half-year convention using 200DB. On $400,000 of 5-year basis, that produces approximately $80,000 of depreciation in year one.

15-Year Land Improvements (150DB, Half-Year Convention): IRS MACRS tables show approximately 5% in year one for 15-year property under the half-year convention using 150DB. On $800,000 of 15-year basis, that produces approximately $40,000 of depreciation in year one.

39-Year Nonresidential Real Property (SL, Mid-Month Convention): The annual straight-line rate is approximately 2.564% for 39-year property. On $350,000 of 39-year basis, the full-year deduction is approximately $8,974. Adjusted for mid-month convention based on acquisition month, the first-year deduction will vary.

Combined, a properly segregated $3.5 million park can produce materially higher first-year depreciation than the $89,700 that comes from a single 39-year schedule. The exact amounts depend on your specific allocation, acquisition date, and current bonus depreciation rules.

Step 6: Apply Bonus Depreciation to Qualifying Assets

Bonus depreciation under IRC §168(k) allows you to deduct a percentage of the cost of qualifying property in the first year it is placed in service, above and beyond regular MACRS depreciation.

For tax years after September 27, 2017, bonus depreciation was expanded to apply to used property (not just new), which is significant for MHP acquisitions since virtually all park assets are used at the time of purchase.

Qualifying property for bonus depreciation includes 5-year and 15-year MACRS property. It does not include 27.5-year or 39-year real property. This is why the cost segregation study matters so much for MHP investors — every dollar you move from 39-year into 5-year or 15-year classification is a dollar potentially eligible for bonus depreciation.

The bonus depreciation percentage has been phasing down. Verify the current-year bonus depreciation percentage with your tax advisor, as it changes based on when the property was placed in service. The IRS provides current guidance in Publication 946 and related notices.

The Form 3115 Lookback Correction

If your mobile home park has been on a single 39-year schedule for years and you recently discovered you should have been using shorter class lives, you are not out of options. IRS Form 3115 (Application for Change in Accounting Method) allows you to catch up all the missed depreciation in the current tax year as a Section 481(a) adjustment.

This is not an amended return process — it is a prospective accounting method change that captures all prior-year underdeductions in the current year. A cost segregation study on an existing park you have owned for several years can still produce a significant current-year deduction through Form 3115. Consult with a qualified MHP tax advisor before filing.

Comparison Table: MACRS Asset Classes for Mobile Home Parks

FAQ: Depreciation Calculations for Mobile Home Parks

For official MACRS tables and bonus depreciation guidance, see IRS Publication 946 — How to Depreciate Property.

Related reading: The 15-Year Land Improvement Rule: What Every MHP Owner Must Know | Depreciation vs Cash Flow in a Mobile Home Park | How MHP Owners Build Wealth Through Tax Deferral

Disclaimer: This article is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently and the information in this post reflects general principles that may not apply to your specific situation. Consult a qualified tax professional before making any decisions based on this content. The MHP Accountant® provides tax services to mobile home park owners; engagement of our firm creates a client relationship subject to our engagement letter terms.