Today TaxMama® hears from Klondike in the TaxQuips Forum with this question. “In March, I purchased a new mobile home and placed it on property I own. It is skirted with wheels removed and set on cement pillars. My son lives in the home and pays rent. Is it best to depreciate the home for S/L 27.5 years and break out the land improvements (septic, water and electrical, wooden deck) for 15 years? Also, is it eligible for bonus depreciation or Sec 179?”
This IS a good question.
The wooden deck and attachments to the land will be depreciated at the 27.5 years MACRS SL mid-month rate.
But the mobile home…aaah…let’s see what that will be. Hmmm…no kidding? IRS specifically says that this IS depreciated just like residential rental property – over 27.5 years!
Residential rental property. This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy.
As to the septic and utility improvements, that’s not entirely clear to me. There are a couple of categories (20-year and 25-year) when it comes to municipal sewage systems and utilities. But these are not municipal. They are on your property.
And they are certainly designed to be used for more than 25 years (even if they must be inspected with some regularity). However, the question is, are they part of the land (non-depreciable) or building improvements – depreciate over 27.5 years?
Personally, I would treat them as part of the land. I may be wrong. This is where your own tax pro would make the final determination.
Now, on to your question about the Section 179 depreciation.
Nope. If you were renting a motor home (not attached), it would be personal property. It would be depreciate like a car or truck (over 5 years) subject to the Section 179. Since this is regarded as residential rental property, alas, no Section 179 or Bonus depreciation.
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