100% Bonus is Back - What it Means for MHP operators

[Ben Schuster]

Helpful context in regards to the tax benefits on MHPs for anyone who is interested! The Big Beautiful Bill is now in effect, bringing back 100% bonus depreciation—a powerful tax incentive that allows investors to immediately deduct the full cost of qualifying assets in the first year, rather than depreciating them over time. Investments in manufactured housing communities are among the biggest beneficiaries of this change. That’s because the majority of the property components—roads, utilities, fencing, and other land improvements—qualify for 100% bonus depreciation. How It Works When you acquire a property, we conduct a cost segregation study to break down the purchase price into: Land, Buildings, Infrastructure, Personal Property While traditional buildings are typically depreciated over 27.5 to 39 years, shorter-life assets—like water and sewer lines, electrical infrastructure, and roads—can be depreciated over 5, 7, or 15 years. In manufactured housing communities, roughly 80% of the purchase price is often comprised of land improvements, which fall into the 15-year-and-under category. Under current tax law, any asset with a useful life of 15 years or less qualifies for 100% bonus depreciation. That means these components can be fully expensed in year one, often resulting in a 1:1 ratio of invested equity to paper losses. And if you're wondering—“Ben, 80% doesn’t equal 100%, so how do I end up with 1:1 or more losses than my equity investment?”—the answer lies in leverage. The loan on the deal increases the total allocated purchase price, giving you depreciation benefits on a much larger base than just your equity contribution. Example: A $250K investment may generate $250K + in year-one tax deductions. What This Means for Your Taxes How you can use these losses depends on your personal tax situation—especially whether you own other real estate or qualify as a Real Estate Professional (REPS). Without REPS: Depreciation can only offset passive income (e.g., rental income, K-1 distributions). With REPS: You can apply those losses to active income—like W-2 wages, business income, or commissions—dramatically reducing your tax liability. For high earners, that can mean writing off $100K, $250K, or more in income—just by investing in the right real estate deal. How to Qualify for REPS To unlock the full benefit, you must meet the following criteria in a given tax year: Spend 750+ hours on real estate activities Spend more than 50% of your total working hours in real estate Show material participation in property operations 💡 Pro tip: If you’re married, only one spouse needs to meet the REPS criteria to unlock the benefit for the entire household. And no—you do not need to be a licensed Realtor or broker to qualify. Be sure to confirm with your CPA. I am not a CPA and this is not a recommendation or professional advice.

[Dominic Mazzarella]

Quote from @Ben Schuster:

Not necessarily, but those can also be depreciated and act in the same way. With POH, the goal is to sell the homes (at least that's our goal at Comfort Capital). If you accelerate the depreciation, you could face depreciation recapture when you sell.

The more powerful example is in the land improvements. When you purchase a mobile home park, you typically don’t own any vertical buildings—maybe a clubhouse, but that’s usually a small allocation. Roughly 80% of the purchase price is often allocated to mechanical infrastructure (sewer, water lines, electrical, gas lines, etc.), as well as the roads, concrete pads, fencing, and similar improvements. All of these generally fall under a 15-year or shorter depreciation schedule, making them eligible for 100% bonus depreciation. There is always recapture (for any asset class), but if you deploy a 1031 exchange strategy and forever hold RE mindset, you continue to kick the can down the road until you eventually die and your heirs get a step-up in basis. 

Got it, and that makes sense. I always have my CPA handle all that so I'm definitely not the most versed in tax changes, but that's good to know. I also don't like to keep POH. Heck, sometimes it's more profitable to straight up give them away(sell for $1).