100% Bonus Depreciation Is Back: MHP Returns in 2026

Published May 29, 2026

Two forces are reshaping mobile home park (MHP) economics in 2026, and they point in the same direction. The first is a tax change: the One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, and the IRS clarified the application rules in early 2026. The second is capital: institutional and private-equity money keeps consolidating the sector, compressing cap rates and pushing well-marketed parks to sale prices above expectations.

Together they sharpen a question every MHP investor is weighing right now — not just "what's my cash-on-cash?" but "what's my after-tax return, and is now the moment to buy or sell?" This post walks through how the restored bonus depreciation rules change the math on a park, how to model cost segregation honestly, and how the institutional bid factors into timing.

What Actually Changed on the Tax Side

For years, bonus depreciation was on a phase-down path — falling 20 percentage points a year and headed for full expiration. That uncertainty led a lot of owners to skip cost segregation studies, especially on smaller assets where the math looked marginal at 60% or 40%.

The OBBBA, signed July 4, 2025 (Public Law 119-21), reversed that. For qualifying property that is both acquired and placed in service after January 19, 2025, 100% first-year bonus depreciation is back — and, under current law, permanent. The practical effect is that the entire cost of qualifying short-life assets (5-, 7-, and 15-year property) can be deducted in year one rather than spread over decades. Property under a binding contract signed after the cutoff date generally qualifies regardless of when it's placed in service.

Why this matters so much for mobile home parks specifically: a large share of a park's value sits in exactly the kind of components that qualify for accelerated depreciation. Land improvements — roads, utility lines, water and sewer infrastructure, pads, landscaping, signage, fencing — frequently fall into the 15-year class. In many parks, a meaningful percentage of the purchase price can be reclassified into bonus-eligible categories, far more than in a typical apartment building dominated by long-life structure.

How to Model Cost Segregation Into a Park (Honestly)

Bonus depreciation is powerful, but it's a timing benefit, not free money — and modeling it badly is an easy way to overstate returns. Here's the disciplined approach.

Step 1: Estimate the Bonus-Eligible Allocation

The building structure itself doesn't qualify; a cost segregation study is needed to identify which components have a recovery period of 20 years or less. As a rough planning figure, reclassifying even 15% of a purchase price to shorter-lived assets produces substantial first-year deductions — on a $5M acquisition, that's around $750,000 of accelerated deduction. In practice that 15% is conservative for parks: cost-seg providers report MHP studies often allocating 30%-plus of basis to 15-year land improvements. Even so, a specific number shouldn't be underwritten until a study supports it.

Step 2: Separate the Tax Benefit From the Operating Return

Keep the pre-tax cash flow model clean. Bonus depreciation does not change NOI, cap rate, or operating cash flow — it changes taxable income and therefore the timing of tax paid. Model the operating return on its own, then layer the depreciation benefit as a separate after-tax overlay. Mixing the two is how a tax-driven number accidentally gets presented as operating performance.

Step 3: Account for the Catch — Depreciation Recapture

The deduction front-loaded here comes back at sale as depreciation recapture, taxed at exit. A first-year deduction is worth more than a deferred one because of the time value of money, but the benefit is acceleration, not elimination. An honest after-tax model shows the deduction in year one and the recapture at exit, then measures the net present-value gain. A model that only shows the upfront deduction is incomplete.

A Few Technical Traps

• Both dates must qualify — but "acquired" means binding contract. For the full 100%, the relevant acquisition and placed-in-service timing must fall after January 19, 2025. Per IRS Notice 2026-11, the IRS uses the binding contract date rather than the closing date to determine when a property is acquired — so a park placed under contract after January 19, 2025 generally qualifies even if closing slipped months later. Assets tied to the earlier phase-down years still carry the reduced percentages.
• The 163(j) interaction. Investors who previously elected out of the business-interest-deduction limit may be on depreciation schedules that don't qualify for bonus. That tradeoff is worth revisiting with a tax advisor.
• This is not tax advice. The rules are technical and fact-specific. Model the strategy, but confirm the specifics with a CPA before relying on the numbers.

The Other Force: Institutional Capital and a Narrowing Window

While the tax change improves after-tax returns for buyers, the capital environment is doing something to pricing on the other side of the table.

Institutional consolidation continues to be one of the defining trends of the sector. Per Matthews Real Estate Investment Services, premium communities have been trading at cap rates in roughly the 4% to 5% range, with stabilized assets generally transacting between about 5% and 7% — broadly consistent with Northmarq's reported ~5.9% average MHC cap rate in 2025. Matthews also reports well-marketed parks achieving prices 8% to 15% above initial expectations; that figure describes premium, well-marketed assets rather than the typical sale (other 2024 transaction data showed parks more often clearing below list), so treat it as a best-case rather than a market-wide norm.

For a buyer, that means the bonus-depreciation tailwind is partly offset by a more competitive acquisition environment — paying up to win the deal is a real possibility. For a seller, it means conditions remain favorable, though the window to capture peak value could narrow as more supply of sellers eventually meets the institutional bid. The strategic question for an existing owner isn't simply whether to sell, but whether the asset is positioned to capture peak value now — or whether a 1031 exchange into a more passive position makes sense.

Putting It Together: A 2026 Decision Framework

For a buyer:

• Underwrite the operating return first, then add the after-tax bonus-depreciation overlay — including recapture at exit.
• Price the park on durable lot income, not on the tax benefit. Bonus depreciation can improve a good deal; it shouldn't be relied on to rescue a bad one.
• Factor the institutional bid into acquisition assumptions: in compressed-cap markets, the basis has less room for error.

For a seller:

• Recognize that the buyer's improved after-tax math can support competitive pricing — part of why parks have been clearing above expectations.
• Evaluate whether the asset captures peak value today, and weigh a 1031 exchange into a more passive strategy against holding.

The Bottom Line

The restored 100% bonus depreciation genuinely changes mobile home park economics — parks are unusually rich in the land-improvement components that qualify, so the first-year deduction can be substantial. But it's a timing benefit that reverses at exit, and it's best modeled as an after-tax overlay on a clean operating return, not blended into it. Layer on an institutional capital environment that's compressing cap rates and pushing prices above expectations, and the result is a market that rewards investors who can model both the tax and the operating sides with discipline — and who price the asset on its income, with the tax benefit as the bonus it actually is.

For the underlying mechanics, see mobile home park underwriting and cap rate explained.

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This analysis reflects current market interpretations as of the publication date and may evolve as new data becomes available. Figures cited are drawn from public sources including the One Big Beautiful Bill Act (Public Law 119-21), IRS Notice 2026-11, and MHP market data from Matthews Real Estate Investment Services and Northmarq, and are subject to revision. This post is not tax or investment advice; tax rules are technical and fact-specific, and readers should conduct their own diligence and consult a qualified CPA and other professionals before making investment decisions.