Most mobile home park owners are paying more depreciation tax than they should — not because they’re doing anything wrong, but because their CPA has never built a depreciation schedule for an MHP and doesn’t know what to separate out. The result is every road, utility line, and park-owned home getting lumped into a 39-year schedule when many of those assets should be depreciating in 5 or 15 years.

Mobile home depreciation is one of the most powerful tax tools available to park owners. Getting it right — understanding the correct mobile home depreciation life for each asset class, applying the right mobile home depreciation rate, and integrating it with bonus depreciation and cost segregation — can materially change your annual tax position. Getting it wrong costs you every year you hold the park.

What Is Depreciation and Why It Matters for MHP Owners

Depreciation is the IRS mechanism that lets you deduct the cost of an asset over its useful life rather than all at once. For mobile home park owners, this is critical because your assets — land improvements, infrastructure, park-owned homes, and buildings — represent significant capital, and depreciation turns that capital into annual tax deductions without you writing a check.

Here is the key concept: depreciation on mobile homes and park infrastructure reduces your taxable income each year, often creating a paper loss that offsets real income from lot rents. Done correctly, it is one of the few strategies that generates a tax deduction simply from owning property.

Mobile Home Depreciation Life: What the IRS Says

The mobile home depreciation life IRS rules depend entirely on how the asset is classified. There are several distinct categories park owners deal with — and each has dramatically different deduction timelines.

Park-Owned Homes: 27.5 Years vs. 5 Years

This is where most MHP owners get tripped up. The classification of a park-owned home (POH) depends on whether it is considered real property or personal property.

• Real Property (27.5 years): If the home is on a permanent foundation and treated as real property under state law, it depreciates over 27.5 years using the straight-line method — the same as residential rental real estate.
• Personal Property (5 years): If the home is not permanently affixed, retains its vehicle title, and is classified as personal property, it qualifies for 5-year MACRS depreciation — a dramatically faster writeoff. This is one of the most significant planning opportunities for POH park owners.

Land Improvements: 15 Years

Land improvements are one of the most underused depreciation categories in mobile home park investing. The IRS allows a 15-year depreciation life for land improvements, which includes roads, driveways, utility infrastructure (water, sewer, electric), landscaping, fences, gates, and signage.

Buildings and Structures: 39 Years

Any permanent commercial structures on the park — an office building, laundry facility, community center — are depreciated over 39 years as commercial real property. The annual mobile home depreciation rate here is about 2.564% per year, a slow burn that is best supplemented with cost segregation to accelerate shorter-lived components.

Personal Property Assets: 5 or 7 Years

Equipment and personal property used in park operations — appliances in park-owned homes, mowers, maintenance equipment, computers — typically qualify for 5-year or 7-year MACRS depreciation. These are also prime candidates for bonus depreciation or Section 179 expensing.

MHP Depreciation Comparison

Bonus Depreciation: Accelerating Your Mobile Home Depreciation

Under the Tax Cuts and Jobs Act, bonus depreciation allowed 100% first-year expensing of qualifying property. Assets with 5-year, 7-year, or 15-year lives are eligible for bonus depreciation. By segregating components into shorter asset classes through cost segregation, you capture accelerated deductions in year one — generating substantial deductions at acquisition.

Cost Segregation: The Tool That Unlocks Maximum Depreciation

Cost segregation is an engineering-based tax analysis that reclassifies building components from long-lived categories (27.5 or 39 years) into shorter-lived categories (5, 7, or 15 years). For mobile home park owners, this is particularly valuable because parks contain significant amounts of 15-year land improvement property that is often left in the wrong category.

At The MHP Accountant, we work with qualified cost segregation engineers and integrate their studies directly into your tax returns to ensure maximum benefit and full IRS compliance. For more on what a study involves, see our cost segregation service page.

How Depreciation Interacts With Your Overall MHP Tax Strategy

Passive Activity Rules

For most MHP owners, rental income and depreciation losses are treated as passive. Passive losses can only offset passive income. The exception is Real Estate Professional status, which requires 750+ hours per year in real property activities and more hours in real estate than any other profession. If you or your spouse qualifies, depreciation losses become fully deductible against all income.

Depreciation Recapture at Sale

When you sell a park, the IRS recaptures depreciation you have taken. Section 1250 recapture on real property is taxed at a maximum rate of 25%. Personal property recapture (Section 1245) is taxed as ordinary income. This is why exit planning matters — a 1031 exchange defers both capital gains and depreciation recapture, keeping your equity working rather than shrinking at sale.

Basis and Future Sales

Every dollar of depreciation you take reduces your adjusted basis in the property. This increases your eventual gain at sale. The math still typically favors taking depreciation now, but the calculation depends on your holding period, exit strategy, and tax rates. See the IRS Publication 946 for the complete MACRS rules.

MHP Depreciation Planning Checklist

• Complete a purchase price allocation at acquisition — do not let the closing statement do it for you
• Commission a cost segregation study on any park over $500,000 in purchase price
• Determine the correct classification (real vs. personal property) for each park-owned home
• Track capital improvements separately from repairs — they have different depreciation treatment
• Evaluate Real Estate Professional status eligibility annually
• Model depreciation recapture scenarios before listing a park for sale
• Use a 1031 exchange to defer recapture if exiting a park with large accumulated depreciation

Frequently Asked Questions

What is the IRS depreciation life for a mobile home?

It depends on classification. A mobile home treated as personal property (not permanently affixed, retaining its vehicle title) qualifies for 5-year MACRS depreciation. A mobile home treated as real property on a permanent foundation is depreciated over 27.5 years. The distinction is determined by state law and the specific facts of the property.

Can I take bonus depreciation on park-owned homes?

Yes — if the home qualifies as personal property (5-year MACRS), it is eligible for bonus depreciation under IRC Section 168(k), subject to the current phase-down schedule. Homes classified as real property (27.5-year) are not eligible for bonus depreciation. This is one of the most significant planning opportunities available to POH park owners.

What is the depreciation rate for mobile home park infrastructure?

Roads, utilities, and other land improvements at a mobile home park are classified as 15-year property under MACRS. The 150% declining balance method applies, giving a first-year depreciation rate of approximately 10% before bonus depreciation. With bonus depreciation, a large portion of the land improvement cost may be deductible in the first year.

How does depreciation recapture work when I sell my park?

At sale, the IRS recaptures the depreciation you have taken. Real property depreciation (Section 1250) is recaptured at a maximum 25% rate. Personal property depreciation (Section 1245) is recaptured as ordinary income at your marginal rate. A 1031 exchange defers both capital gains tax and depreciation recapture by rolling proceeds into a like-kind property.

Do I need a cost segregation study for my mobile home park?

For any park purchased for $500,000 or more, a cost segregation study commonly pays for itself in accelerated tax deductions. The study identifies components eligible for 5-year and 15-year MACRS treatment that would otherwise be lumped into slower depreciation schedules. The MHP Accountant can help you evaluate whether a study makes sense for your specific park.

This content is for educational purposes only and does not constitute tax or legal advice. The MHP Accountant recommends consulting a qualified CPA for advice specific to your situation.