Cost Segregation for RV Parks and Campgrounds: Where Land Improvements Dominate
An Asset Class Made Almost Entirely of Land Improvements
RV parks and campgrounds are unusual among real estate asset classes because there is often very little building. What you are buying is land plus an extensive network of site improvements: pads, roads, utility hookups, bathhouses, and amenity areas.
That composition is extremely favorable for cost segregation. Land itself is never depreciable. But everything built on it, the paving, the pads, the utility distribution, the lighting, the fencing, is a 15-year land improvement, and 15-year property is bonus depreciation eligible. The buildings that do exist, typically a bathhouse, an office, and a camp store, are a small fraction of total cost.
The result is that RV parks and campgrounds routinely reclassify 50 to 70 percent of depreciable basis, among the highest rates of any property type. The main analytical work in these studies is separating depreciable improvements from non-depreciable land, which is where an engineering-based approach earns its cost.
What Qualifies at an RV Park
The 15-year land improvement category dominates and includes concrete and gravel RV pads, interior roads and drive lanes, parking areas, the water distribution system from the meter to each site hookup, the sewer collection system and site connections, electrical distribution including pedestals, transformers, and the conduit serving each site, site and pathway lighting, propane distribution, fencing and entry gates, signage foundations, landscaping and irrigation, retaining walls, stormwater management and drainage, and hardscape at pools, pavilions, and gathering areas.
The 5-year and 7-year categories capture the equipment and furnishings: laundry equipment in the bathhouse, camp store fixtures and refrigeration, pool pumps, filtration, and chemical systems, playground equipment, WiFi and network infrastructure across the park, security cameras and gate access systems, office equipment and furnishings, golf carts and maintenance equipment, and the decorative lighting and finishes in the bathhouse and clubhouse.
Cabins and park model units deserve separate analysis. Depending on whether they are permanently affixed and how they are titled, they may be depreciable buildings, land improvements, or personal property, and the answer materially affects the recovery period.
A $3 Million RV Park Example
Consider a 120-site RV park purchased for $3,000,000. The land component is significant in this asset class; assume $900,000 is allocated to raw land, leaving $2,100,000 of depreciable basis. Absent a study, an owner who treats the whole thing as a 39-year asset deducts $53,846 per year.
An engineering-based study identifies $252,000 of 5-year and 7-year property (12 percent) and $1,218,000 of 15-year land improvements (58 percent), for total reclassification of $1,470,000, or 70 percent of depreciable basis. Only $630,000, essentially the bathhouse, office, and camp store, remains on the 39-year schedule.
With 100 percent bonus depreciation on the reclassified property, the first-year deduction is $1,470,000 plus roughly $16,200 on the buildings, totaling about $1,486,200. Against $53,846 under the default treatment, that is $1,432,000 of additional first-year deduction, roughly $530,000 of deferred federal tax at a 37 percent rate.
The Passive Activity Analysis Is Unusually Favorable
RV parks and campgrounds frequently fall outside the rental activity definition entirely. Under Regulation 1.469-1T(e)(3)(ii)(A), an activity is not a rental activity if the average period of customer use is seven days or fewer. Transient campground stays are typically measured in nights, which puts most parks comfortably under that threshold.
The same regulation excludes activities where extensive services are provided, which also fits many parks that offer amenities, activities, and on-site staff. When the activity is a trade or business rather than a rental activity, the owner needs only to materially participate for the losses to be non-passive and usable against active income including W-2 wages.
For an owner-operator living on site or actively managing the park, material participation is usually straightforward to establish and document. This is the same framework that drives the short-term rental strategy, and it applies with even greater force here. AE Tax Advisors addresses the documentation standard in their guide to material participation documentation.
Expansion Phases and Land Allocation
Park owners expand by adding sites, and each expansion phase is nearly pure land improvement. Pads, utility runs, and road extensions are almost entirely 15-year property, which means an expansion budget can be close to fully expensed in the year the sites are placed in service.
The single most important input in these studies is the land allocation. Because raw land is a large share of an RV park's value and is never depreciable, an aggressive land allocation destroys value while an unsupported one creates exposure. A defensible study documents the land value with reference to comparable land sales or an appraisal, then segregates only the improvements above it.
Cabins, Park Models, and How They Are Titled
Many parks add cabins, yurts, or park model units to capture higher nightly rates, and how those units are classified is one of the more consequential judgments in a campground study.
A permanently affixed cabin on a foundation, connected to utilities and not designed to be moved, is generally a building. Whether it is residential rental property at 27.5 years or nonresidential at 39 years depends on the average period of guest use, which in a transient park is usually short enough to land it in the nonresidential category.
A park model or RV that retains its wheels and title, sits on a pad, and can be relocated is a different asset entirely. Units that remain titled as vehicles and are not permanently affixed are frequently treated as tangible personal property with a much shorter recovery period, which is a substantially better outcome.
The distinction turns on the same permanence analysis that governs everywhere else in cost segregation: how it is attached, whether it was designed to be moved, and how difficult removal actually is. Because the classification swings the recovery period from 39 years to 5 or 7, it deserves specific documentation in the report rather than a blanket assumption.
Getting a Study Scoped
Stratum performs engineering-based cost segregation studies on RV parks, campgrounds, glamping properties, and marina and outdoor hospitality assets, including expansion phase studies.
Request a free estimate or book a call to discuss your park.