MHP Depreciation

I would like some advice on what other owners have done in regards to the depreciation of a park on their tax return since my accountant has not previously had any experience preparing a return for a park owner before.

I understand that the general rule of thumb is that you can depreciate anywhere from 50% to 75% of the value of the park as improvements (infrastructure, utilities, etc.) and that you cannot depreciate raw land. However, I would like some advice as to whether you can depreciate based on your total purchase price or whether it should be based on the appraised value of the property available on the county assessor website.

In my case, the appraised value of the park is about $100,000 less than my purchase price so this would make a large difference on my tax return depending on which one I choose.

You should allocate the purchase price among the assets you purchased (land – figure what it’s worth by looking at comps; infrastructure best you can, etc). Anything left over is goodwill. Then once you have allocated the purchase price into each category, the accountant should know how to depreciate it. See also other threads on this topic.

1 Like

Thanks for your feedback Brandon.

I have obtained cost segregation analysis for parks where the land price was not broken out from the remainder of the park price. Interestingly none of what you would call the “excess price” went to good will. The beauty of a park is that everything with the exception of the land can be depreciated over 15 years

Unfortunately it’s more nuanced than that and entirely depends on what the assets owned by the park are. Are there any POH? Is there an office? The IRS has a number of relevant publications on this, such as pub 527 and https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-table-of-contents.

1 Like