Cost segregation has long served as a useful tax planning tool for real estate investors. Recently, however, a change in federal tax law may have made it more powerful than it has been in years. With 100% bonus depreciation now permanently restored, every dollar that a cost segregation study reclassifies into shorter-life property could potentially be deducted right away. For mobile home park investors, that shift may meaningfully improve the after-tax picture.

What Cost Segregation Actually Does

Normally, the IRS requires investors to depreciate real property slowly. Residential property typically follows a 27.5-year schedule, while commercial property follows a 39-year schedule. As a result, deductions trickle in over decades.

A cost segregation study works differently. Essentially, an engineering-based analysis breaks a property into its component parts. It then identifies items that may qualify for much shorter recovery periods of 5, 7, or 15 years. In a mobile home park, those components could include roads, water and sewer lines, electrical systems, landscaping, signage, and other land improvements.

Because these shorter-life components depreciate faster, investors may be able to front-load a meaningful portion of their deductions. That, in turn, could improve early cash flow.

Why the 2025 Tax Change Raised the Stakes

Bonus depreciation lets investors deduct a large share of qualifying property in the first year, rather than spreading it out. The challenge in recent years was that the rate had been steadily falling.

From a Scheduled 40% to a Full 100%

Under the previous phase-down schedule, bonus depreciation was set to drop to just 40% in 2025 and disappear entirely by 2027. Then, on July 4, 2025, the One Big Beautiful Bill Act changed course. It permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025.

The difference matters. Previously, only 40% of reclassified short-life property could be written off in year one. Now, potentially 100% can be. In other words, the same cost segregation study may unlock more than twice the first-year deduction it would have produced under the scheduled rate.

Why Mobile Home Parks May Suit Cost Segregation Well

Mobile home parks may be especially well positioned to benefit. In many communities, residents own their homes while the operator owns the land and infrastructure. Consequently, a large share of a mobile home park’s value often sits in land improvements — exactly the 15-year property that cost segregation targets.

This matters when you consider the scale of the asset class. Roughly 22 million Americans live in manufactured housing, and national occupancy has climbed toward 94% in recent years. Strong, steady demand combined with infrastructure-heavy assets could make the tax efficiency of mobile home park investing particularly worth exploring.

A Worked Mobile Home Park Example

Consider a hypothetical $5 million mobile home park acquisition. These figures are illustrative only.

First, an investor must set aside the value of the raw land, which is not depreciable. After doing so, suppose a cost segregation study identifies roughly $1.4 million of the remaining basis as 5-, 7-, and 15-year property — largely roads, utilities, and other land improvements.

Here is where the rate makes a difference:

• Under the scheduled 40% rate, about $560,000 might have been deductible in year one.
• Under the restored 100% rate, the full $1.4 million could potentially be deducted in year one.

That gap — roughly $840,000 in additional potential first-year deductions — helps explain why the change has drawn so much attention. For a passive investor, those paper losses may help offset taxable income, depending entirely on their individual situation.

What Investors Should Keep in Mind

No tax strategy fits everyone, and several factors could affect the outcome.

State conformity varies, for instance. Some states follow the federal 100% rule fully, while others conform only partially or not at all. Timing also matters, since the property generally must be acquired and placed in service after the January 19, 2025 cutoff to qualify for the full rate. In addition, the IRS issued fresh guidance in early 2026 clarifying how the rules and certain elections apply.

A quality cost segregation study still carries a cost, often several thousand dollars. Even so, the potential benefit may be significant when paired with 100% bonus depreciation.

The Bigger Picture

Ultimately, these tax dynamics are one more reason that investors continue to look closely at mobile home park investing. The asset class combines durable demand for affordable housing with an infrastructure-rich structure that may lend itself well to cost segregation.

Of course, tax outcomes depend heavily on individual circumstances. Therefore, investors should always consult a qualified tax advisor before acting. Still, in a 100% bonus world, cost segregation may deserve a closer look than ever.

Disclaimer:

The information provided is for informational purposes only and is not investment advice or a guarantee of any kind. We do not guarantee profitability. Make investment decisions based on your research and consult registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations. This article was written with the help of AI and reviewed by Andrew’s team. Always consult a licensed professional before investing.