The reality is simple: mobile home parks are infrastructure-heavy assets. That means more ambiguity, more judgment calls, and more IRS scrutiny.

Below is a practical, operator-focused framework based on what The MHP Accountant® sees in the field.

What Counts as a Repair in a Mobile Home Park?

A repair must restore the property to its normal operating condition without materially improving it. For MHPs, common repairs include items like:

• fixing a leaking water line (patch, not replacement)
• repairing potholes (not full resurfacing)
• replacing a broken light fixture
• repairing a single electrical pedestal
• replacing skirting on a POH
• patching a roof on a POH
• repairing stairs, decks, or railings

These expenses are typically deductible in the year incurred. However, they need proper documentation. When we review client books, vague entries like “vendor – $3,500” create IRS exposure. Always include:

• what was repaired
• where it occurred (lot #, home #, street)
• before/after photos
• invoice detail

This documentation matters during IRS audits, due diligence, and bank reviews.

What Counts as CapEx (Capital Improvements)?

A capital improvement must:

1. Improve the property
2. Restore it to like-new condition
3. Extend its useful life
4. Add value or functionality

In an MHP, CapEx often includes:

• replacing water or sewer lines
• resurfacing roads
• replacing electrical pedestals park-wide
• new signage or fencing
• a new POH roof or full rehab
• home rehabs to turn inventory into rental-ready units
• major tree removal projects
• drainage or grading work

CapEx is depreciated over time — often 15 years (land improvements), 27.5 years (residential), or 5–7 years for certain equipment. This is where cost segregation dramatically accelerates deductions.

A common mistake we see is capitalizing the entire project without separating components. Example:

A park replaces all pedestals for $90,000. Most operators lump the entire cost into one asset. Instead, we break out:

• electrical equipment (5–7 year assets)
• trenching and installation (15-year land improvements)
• panel/pedestal replacements (5–7 year assets)

This allows owners to assign a shorter recovery period to eligible components — increasing deductions.

Examples Based on Real MHP Scenarios

Here are common gray areas we see and how we classify them:

Resurfacing Roads vs. Patching
• patching → repair
• full mill/overlay → CapEx (15-year land improvement)

Water Line Issues
• fixing a break → repair
• replacing the entire line → CapEx

POH Repairs
• replacing one window → repair
• full interior rehab → CapEx
• new roof → CapEx
• vinyl skirting → repair or CapEx (depends on scope)

Electrical Issues
• fixing one pedestal → repair
• replacing all pedestals in a row → CapEx
• upgrading panel amperage → CapEx

Tree Work
• broken limb removal → repair
• full tree removal → CapEx
• clearing trees for new lots → CapEx

The IRS pays particular attention to MHP infrastructure, so proper classification and documentation protects you during an audit.

CapEx vs. Repairs in a Stabilization or Turnaround

Many park acquisitions involve significant upfront work. In stabilization-focused parks, the first 18–36 months may include:

• road work
• utility infrastructure upgrades
• home rehabs
• tree clearing
• lot conversions

Operators often ask if these costs can be expensed. The answer: “sometimes.” The key question is whether the work:

• restores neglected condition → often repairs
• materially improves the park → CapEx
• prepares new lots for occupancy → CapEx
• returns the asset to stabilized operations → depends on facts and documentation

This is where our firm often creates a CapEx/repair allocation schedule that satisfies both lenders and the IRS.

Using Cost Segregation to Accelerate CapEx Deductions

Even if you capitalize an improvement, you don’t always need to wait 15+ years for deductions.

Cost segregation allows you to break an improvement into shorter-lived components:

• pedestals → 5 or 7 years
• asphalt → 15 years
• fencing → 15 years
• concrete → 15 years
• drainage → 15 years
• parking pads → 15 years
• home components → 5, 7, or 15 years

And if bonus depreciation is available, major tax acceleration becomes possible.

We also routinely identify “missed” depreciation from prior years and pull it into the current year using Form 3115.

The Biggest Mistakes Park Operators Make

The MHP Accountant® sees the same issues repeatedly:

• coding all POH work as repairs
• inconsistent vendor categories
• no CapEx vs. repair policy
• using the wrong useful life for assets
• failing to separate components of improvements
• treating make-ready work as repairs when it’s CapEx
• lumping infrastructure upgrades into “repairs & maintenance”
• no fixed asset schedule
• not documenting lot-specific work

These issues lead to misstated financials, lost depreciation, and IRS risk.

How to Set Up Your Chart of Accounts Correctly

At a minimum, include separate expense and CapEx buckets for:

Repairs & Maintenance
• POH repairs
• TOH infrastructure repairs
• electrical repairs
• plumbing repairs
• road patching
• tree trimming
• HVAC/appliance repairs

Capital Expenditures
• land improvements
• infrastructure upgrades
• utility line replacement
• road resurfacing
• POH rehabs
• park signage
• fencing
• drainage work
• electrical pedestal replacement

This separation improves tax reporting, investor transparency, and lender confidence.

When You Should Call The MHP Accountant®

If any of the following apply, you should get help:

• you’re unsure how to classify recent projects
• you’re preparing for a sale or refinance
• your depreciation schedules are outdated
• your bookkeeping is messy or inconsistent
• you recently completed heavy improvements
• you have POH repairs that might actually need capitalization
• you want to claim missed bonus depreciation
• your lender is requesting CapEx detail
• you need a cost segregation study

MHPs are unique — and the IRS treats them differently than apartments or SFR portfolios.

Ready to Clean Up Your CapEx and Repair Tracking?

If you want help creating a CapEx/repair policy, correcting your books, or maximizing depreciation benefits, The MHP Accountant® is here to assist.

Contact The MHP Accountant
https://themhpaccountant.com/contact/

Disclaimer

This article is for educational purposes only and does not constitute legal, financial, or tax advice. Consult with a qualified professional before making tax or accounting decisions.

The post How CapEx vs. Repairs Should Be Tracked in a Mobile Home Park (Complete Guide) appeared first on The MHP Accountant.

This guide breaks down the true distinctions and how to manage each model correctly.

What Are Tenant-Owned Homes (TOHs)?

A tenant-owned home is a mobile or manufactured home owned by the resident while the park provides the land, utilities, infrastructure, and community services. The resident owns the unit, and the park rents the lot beneath it.

Operational Characteristics of TOHs

• Residents maintain their own homes
• The park maintains only the infrastructure
• Lower ongoing maintenance and repair costs
• Lower CapEx obligations
• Rent is typically lot rent only
• Depreciation is limited to land improvements and infrastructure
• Tenant turnover is generally lower due to the cost of moving to a new home

Tax and Accounting Treatment of TOHs

• The home itself is not depreciated by the park
• Revenue is classified as lot rent
• Infrastructure improvements (pads, utilities, roads) are depreciable
• The park benefits from lower expenses and simpler financials

TOH-heavy parks typically produce stable NOI with lower operational risk.

What Are Park-Owned Homes (POHs)?

Park-owned homes are owned by the community and rented to residents like standard housing units. This model requires significantly more involvement and significantly more accounting accuracy.

Operational Characteristics of POHs

• Park handles home maintenance, repairs, and turnover
• Higher CapEx and ongoing repairs
• Rent includes both home rent and lot rent
• More frequent tenant turnover
• More complex bookkeeping

Tax and Accounting Treatment of POHs

POHs fall into one of three categories depending on their legal and operational structure.

1. POHs Treated as Rental Property (Most Common)

If the park rents out the home directly:

• The home depreciates over 27.5 years as a residential rental property
• Repairs are deductible expenses
• Improvements are capitalized and depreciated
• Appliances and certain components may qualify for 5-year depreciation

This is the traditional model and the most common classification.

2. POHs Treated as Personal Property (State-Dependent)

Some states classify manufactured homes as personal property even when rented.

• Homes may depreciate over 15 years
• Certain components may qualify for 5-year depreciation
• Cost segregation can accelerate deductions even further

Classification depends on state law, title status, and how the home is used.

3. POHs Treated as Inventory (Rent-to-Own or Contract-for-Title)

If a home is being sold via:

• Rent-to-own
• Installment sale
• Lease-option
• Contract-for-title agreements

It may be considered inventory.

Key consequences:

• No depreciation is allowed
• Income may be split between principal and interest
• Expenses may be capitalized into the cost of goods sold
• Repossessions require careful accounting treatment

Misclassifying inventory as depreciable property is one of the most common IRS issues The MHP Accountant® encounters.

Maintenance Differences Between TOHs and POHs

TOH Maintenance

• Residents maintain the home
• Park handles only infrastructure
• Expenses remain low
• Fewer repair deductions
• Less CapEx planning required

POH Maintenance

• Park manages plumbing, electrical, HVAC, roofing, flooring, and appliances
• Repairs are deductible
• CapEx must be capitalized
• More depreciation opportunities
• More detailed bookkeeping is needed

POHs create larger deductions but require significantly more tracking and systemization.

Impact on Financial Statements

TOH Communities Usually Show

• High NOI stability
• Low maintenance and repair costs
• Limited depreciation
• Predictable operating expenses
• Lower turnover

POH Communities Usually Show

• Higher maintenance and repair costs
• More volatile expenses
• Significantly higher depreciation
• Mixed income classifications
• More complex rent rolls

Lenders often prefer TOH communities, but POH-heavy parks offer powerful tax sheltering.

How Depreciation Differs Between TOHs and POHs

TOHs

• No depreciation on the home itself
• Pads, infrastructure, utilities, and improvements qualify for 15-year depreciation
• Limited 5-year personal property assets

POHs

• 27.5-year or 15-year depreciation, depending on classification
• Appliances often qualify for 5-year depreciation
• Higher maintenance deductions
• Strong cost segregation benefits

This is one reason POH-heavy communities can dramatically reduce taxable income when structured properly.

Cost Segregation Benefits: TOH vs. POH

TOH-heavy parks:

• Limited benefit because the park owns fewer assets

POH-heavy parks:

• Materially higher benefit
• More 5-, 7-, and 15-year components
• Stronger bonus depreciation opportunities
• Greater ability to shelter income

Even parks with mixed TOH and POH models can realize substantial tax advantages.

Rent Roll Requirements

The MHP Accountant® often restructures rent rolls because inaccurate reporting is a major IRS red flag.

TOH Rent Roll Must Include

• Lot rent only
• Utility billing is clearly separated
• No home rent

POH Rent Roll Must Include

• Home rent and lot rent are separated
• Repairs tracked per home
• CapEx tracked per home
• RTO contracts are separately identified

A clean rent roll protects the operator during an audit and strengthens financial reporting for lenders.

IRS Considerations

High-risk issues include:

• Depreciating RTO homes
• Treating inventory as rental property
• Misclassifying title status
• Not separating home rent from lot rent
• Inconsistent capitalization policies
• Inaccurate land allocation

IRS Publication 946 provides the official MACRS guidelines:
https://www.irs.gov/publications/p946

Accurate classification of TOHs and POHs significantly reduces audit risk.

Conclusion

Tenant-owned and park-owned homes may look similar, but for tax purposes, they are fundamentally different assets. How you classify them affects depreciation, repairs, basis tracking, rent rolls, passive losses, audit exposure, and long-term financial performance.

If your books mix POHs and TOHs—or you’re unsure how your homes are recorded—now is the time to correct it.

Need Expert Help with POH and TOH Classification?

If you want a professional review of your POHs, TOHs, rent rolls, depreciation schedules, or RTO contract accounting:

Contact The MHP Accountant®
https://themhpaccountant.com/contact/

Disclaimer

This article is for educational purposes only and does not constitute tax, legal, or financial advice. Always consult with a qualified professional about your specific situation.

The post Tenant-Owned Homes vs. Park-Owned Homes: Tax & Accounting Differences appeared first on The MHP Accountant.

Why Mobile Home Parks Are Unique for Depreciation

A mobile home park is fundamentally different from traditional multifamily real estate. Most of the value lies not in buildings, but in infrastructure and land improvements, many of which qualify for shorter recovery periods. This means park owners can legally accelerate significant deductions, shelter income, and create powerful tax advantages.

A common issue The MHP Accountant® identifies is that accountants often book the entire purchase price as a 27.5-year residential property. This dramatically reduces tax benefits and fails to reflect the reality of how MHP assets work.

What You Can (and Can’t) Depreciate in a Mobile Home Park

Land (Non-Depreciable)

Land does not depreciate. But many appraisers assign too much value to land, reducing your depreciable basis. Correcting this is often one of the fastest ways to unlock missed depreciation.

15-Year Land Improvements (Core of MHP Depreciation)

Most of a mobile home park’s taxable value falls in this category, and it depreciates far faster than 27.5-year residential property.

Examples include:

• Asphalt roads and driveways
• Concrete pads
• Curbs, gutters, and sidewalks
• Water, sewer, and gas infrastructure
• Electrical pedestals and utility hookups
• Storm drainage systems
• Retaining walls
• Perimeter and interior fencing
• Signage
• Landscaping improvements
• Playground equipment and amenities

These typically qualify for accelerated depreciation and often bonus depreciation when placed in service.

5-Year Personal Property

These items depreciate extremely quickly and provide early-year tax sheltering:

• Office equipment
• Computers and electronics
• Security systems and cameras
• Maintenance tools
• Laundry machines
• Clubhouse furniture
• Appliances in certain POHs

Cost segregation studies routinely find substantial amounts of 5-year property that generalist accountants overlook.

Park-Owned Homes (POHs)

This is one of the most commonly misclassified areas in mobile home park taxation.

POHs may fall into three possible categories:

1. Rental POHs → 27.5-year property

If rented like a standard housing unit, the home typically depreciates as residential property.

2. Personal property homes → 15-year property

Some states classify manufactured/mobile homes as personal property rather than real estate.

3. RTO / Contract-for-Title Homes → Inventory (Not Depreciable)

If the home is sold via rent-to-own or installment contract, it may be treated as inventory, not depreciable property.

This is a frequent IRS audit trigger—incorrect classification can create substantial adjustments.

Tenant-Owned Homes (TOHs)

TOHs are not depreciable, because the park doesn’t own the structure. But they often improve operational stability and reduce CapEx burdens.

Bonus Depreciation for Mobile Home Parks: A Complete Guide

Bonus depreciation has undergone several changes since 2018, and mobile home park owners have benefited more than most asset classes because parks contain large amounts of short-life property.

Below is the accurate timeline of bonus depreciation as it applies to MHPs:

Bonus Depreciation Timeline (2018 → Present)

Note: 100% bonus depreciation is restored for qualifying property acquired and placed in service on or after January 20, 2025.

Why Bonus Depreciation Matters for MHP Owners

Mobile home parks contain significant amounts of:

• utility infrastructure
• land improvements
• pads
• roads
• fencing
• pedestals
• lighting
• drainage systems

These are almost always 5-, 7-, or 15-year property, which qualifies for bonus depreciation in the year placed in service.

This means:

• Large first-year deductions
• Strong passive loss creation
• Increased cash-on-cash return
• Improved debt-service coverage for refinancing
• Reduced taxable income across a portfolio

You Can Still Claim Missed Bonus Depreciation

Even if bonus depreciation applied in a prior year, you can still take advantage of it by using:

• A cost segregation study
• Form 3115 (Change in Accounting Method)
• A “catch-up” depreciation adjustment under §481(a)

This allows park owners to:

• Pull forward all missed depreciation
• avoid amending prior returns
• Take the entire adjustment in the current year
• unlock large deductions retroactively

The MHP Accountant® performs these corrections frequently when onboarding new park owners.

Cost Segregation: The MHP Advantage

Mobile home parks consistently outperform other real estate types in cost segregation because so much of the asset is not actually “buildings.”

Typical parks break down as follows:

• 20–35%: 5-year property
• 40–60%: 15-year property
• Remainder: Land + limited 27.5-year property

This makes cost segregation one of the most effective tax strategies available to MHP investors.

Depreciation Recapture When Selling a Park

When selling, depreciation recapture may apply:

• 25% on 27.5-year assets
• Ordinary rates on 5- and 15-year assets

Strategies to reduce recapture include:

• Structuring allocations properly
• Avoiding unnecessary personal property allocation
• Planning cost segregation timing
• Using a 1031 exchange
• Reviewing depreciation schedules annually

Most operators dramatically overpay in recapture because these steps were never taken.

Common Depreciation Mistakes MHP Owners Make

The MHP Accountant® frequently uncovers:

• Roads and utilities are misclassified as land
• POHs depreciated incorrectly
• RTO homes depreciated even though they’re in inventory
• No distinction between home rent and lot rent
• Missing infrastructure schedules
• Overstated land allocation from appraisals
• No cost segregation study has ever been completed
• Assets improperly grouped into “buildings”

Correcting these issues almost always results in additional deductions.

Repairs vs. Capital Improvements

Many “repairs” in a mobile home park are actually capital improvements when they:

• extend useful life
• upgrade infrastructure
• improve the property
• adapt it to a new use

Examples include:

• Replacing utility pedestals
• Sewer line replacement
• Park-wide electrical upgrades
• Pad replacements
• Converting septic to sewer

These belong on the depreciation schedule, not the P&L.

Multi-State Depreciation Considerations

Federal depreciation rules apply nationwide, but states may differ on:

• bonus depreciation conformity
• timing of deductions
• classification of manufactured homes
• apportionment for multi-state operators

For help with multi-state planning:
https://themhpaccountant.com

IRS Reference Link

Full MACRS tables and asset class definitions are available from the IRS:
https://www.irs.gov/publications/p946

Conclusion

Mobile home park depreciation is one of the most powerful wealth-building tools available to MHP owners. When done correctly, it increases cash flow, reduces taxable income, strengthens refinancing opportunities, and creates long-term tax efficiency across a portfolio.

When done incorrectly, it leads to lost deductions, IRS exposure, and significant recapture on exit.

If you haven’t reviewed your park’s depreciation schedule—or have never completed a cost segregation study—now is the ideal time to fix it.

Ready to Optimize Your MHP Depreciation Strategy?

If you want a professional review of your depreciation schedule, a cost segregation analysis, or help capturing missed deductions:

Contact The MHP Accountant®
https://themhpaccountant.com/contact/

Disclaimer

This article is for informational purposes only and does not constitute tax, legal, or financial advice. Always consult with a qualified professional about your specific situation.

The post Depreciation Rules for Mobile Home Parks: A Practical Guide appeared first on The MHP Accountant.