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.