What is the correct way to depreciate mobile homes in West Virginia that is used as residential rental property. We own the mobile homes as well as the land. Can we elect to use Section 179 on certain properties? How many years should we spread the depreciation expense over?

ANSWER

The BIDaWIZ Team's Answer:

For federal tax purposes, generally you cannot elect the section 179 deduction for residential rental property such as for a mobile home park. However, there's an exception that allows a business to elect Section 179 treatment when the residential rental property is used for a trade or business. This is supported by IRS Publication 946 and IRC Section 179(d)(1)(C). Also, are you looking to depreciate the mobile homes as a whole or are you going to be bifurcating the property and itemizing specific equipment? In terms of the depreciation life at the federal level, if you don't elect Section 179 treatment, residential rental property has a useful life of 27.5 years. Please note that the provisions and limits of the Section 179 election for the state of West Virginia generally follow the federal tax treatment (i.e. American Recovery and Reinvestment Act).