POH vs TOH: The Tax Difference Every MHP Owner Must Know

You bought a mobile home park. Some homes sit on pads you own and rent back to tenants. Others belong to the residents themselves — they just lease the dirt underneath. To the untrained eye, it looks like one investment. To the IRS, it looks like two entirely different animals.

The park-owned home (POH) vs tenant-owned home (TOH) distinction is one of the most consequential — and most commonly botched — classifications in MHP accounting. Get it wrong and you’re either over-paying taxes for years or sitting on a time bomb that detonates during an IRS audit.

Definitions: What Is a POH and What Is a TOH?

A park-owned home (POH) is a manufactured home that you — the park owner — hold title to. You rent the home and the lot to the resident as a combined package. You are the landlord of both the structure and the land beneath it.

A tenant-owned home (TOH) is a manufactured home where the resident holds title. They own the box; you own the dirt. Your revenue from that pad is pure lot rent. The resident is responsible for the structure, its maintenance, and its disposition.

That single ownership distinction ripples through every corner of your tax return — depreciation schedules, income categorization, expense treatment, and balance sheet presentation.

Depreciation: Where the Real Money Lives

When you own a POH, you hold a manufactured home classified as personal property under federal tax law. Personal property depreciates over 5 years using MACRS — not the 27.5-year schedule that applies to residential rental real estate. That is 5.5 times faster.

Bonus depreciation under current law has allowed MHP owners to take a substantial percentage of that POH cost in year one. Even as bonus depreciation phases down, the 5-year MACRS schedule on personal property gives POHs a dramatically front-loaded depreciation advantage over conventional rentals.

TOHs? You get zero depreciation on the home. The home isn’t yours. You don’t depreciate what you don’t own. Your depreciable assets on the TOH side of the park are limited to land improvements — pads, roads, utility infrastructure — which carry their own depreciation schedules, typically 15 years under MACRS.

Income Treatment: Lot Rent vs Combined Rent

On the TOH side, your income is straightforward: lot rent. You’re collecting a fee for use of the pad and park amenities. It’s passive rental income, reported on Schedule E, and the IRS doesn’t care much about carving it apart.

POH income is more layered. You’re receiving combined home and lot rent. Proper rental income accounting separates POH income into its components. It matters for your cost segregation analysis, for lease agreement structuring, and for documenting the personal property nature of the home revenue.

The Misclassification Problem That’s Costing MHP Owners Money

Here’s the scenario that plays out constantly: a general-practice CPA inherits your park’s books, sees manufactured homes on the depreciation schedule, and defaults to 27.5-year residential property. It is what they know. It is wrong for POHs. It is materially wrong.

The misclassification compounds over time. Every year you’re running 27.5-year depreciation on a 5-year asset, you’re deferring deductions you were entitled to take. Yes, depreciation is timing — but money now beats money later every time, especially when you’re reinvesting it in additional parks or improvements.

For a deeper look at how proper cost segregation for mobile home parks interacts with POH depreciation, that is a critical companion read to this guide.

POH vs TOH: Tax Comparison

Conversion Strategies: When Converting TOH to POH Makes Sense

When you acquire a TOH and take title, that home becomes a POH on your books. You now have a depreciable personal property asset. The tax elections involved include determining the placed-in-service date, establishing cost basis, and deciding whether to elect bonus depreciation or run straight-line 5-year MACRS depending on your income position that year.

The reverse — converting POH to TOH through a sale — triggers gain recognition on the sale of a personal property asset. Section 1245 recapture applies to the depreciation you’ve already taken. This is not a reason to avoid conversions, but it must be modeled in advance. For how this interacts with your overall portfolio, see our MHP investment accounting guide.

Frequently Asked Questions

Are park-owned homes depreciated as residential property or personal property?

POHs are classified as personal property for federal tax purposes when they are not permanently affixed as real property. This means they depreciate over 5 years under MACRS — not 27.5 years like residential rental real estate. Many general-practice CPAs default to 27.5 years and misclassify POHs, which significantly understates depreciation deductions in the early years of ownership.

Do I have to pay taxes when I sell a park-owned home to a tenant?

Yes. When you sell a POH you’ve been depreciating, Section 1245 recapture applies to any gain up to the amount of depreciation previously deducted. That recaptured amount is taxed as ordinary income. Any additional gain above your original basis may qualify for capital gain treatment.

Can I take bonus depreciation on a mobile home I bought for my park?

Yes, POHs acquired and placed in service as personal property rental units are eligible for bonus depreciation under current law, subject to current-year phase-down schedules. The 5-year MACRS classification is what makes bonus depreciation available. If your CPA has misclassified POHs as 27.5-year property, bonus depreciation was likely not applied either — compounding the error.

What is lot rent income vs POH rent for tax purposes?

Lot rent from TOH tenants is passive rental income attributable solely to land use. Combined rent from a POH tenant includes both a land use component and a home rental component. For depreciation substantiation and cost segregation analysis, separating these revenue streams in your books is important.

What happens to my depreciation if I convert all POHs to TOH by selling homes to tenants?

Each POH sale is a taxable disposition of personal property. Section 1245 recapture applies to prior depreciation on each home sold. Depending on your basis, sales price, and holding period, you could trigger significant ordinary income in the year of conversion. This must be modeled before executing any bulk TOH conversion strategy.

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.