Cost Segregation for RV Parks and Campgrounds (2026 Guide)

RV parks and campgrounds combine two features that rarely appear together: almost all of the depreciable basis is 15-year land improvement property, and the activity usually qualifies as an operating business rather than a rental.

The first fact produces reclassification of 55% to 75%. The second means the resulting loss is frequently non-passive and usable against other active income. Together they make campgrounds one of the most tax-efficient real estate adjacent assets available.

Nearly Everything Is a Land Improvement

An RV park is roads, pads, and utilities. Site pads and their gravel or concrete surfaces, interior roads, water distribution, sewer collection and dump stations, electrical distribution with 30 and 50 amp pedestals, site lighting, fencing, signage foundations, and landscaping are all 15-year property under IRC Sec. 168(e)(3)(C).

Amenity infrastructure follows the same treatment. Pool decks and their surrounding hardscape, pickleball and basketball courts, playground surfacing, dog park fencing, fire ring installations, and pavilion foundations are land improvements.

The 39-year structures are limited to the office, bathhouse, laundry building, and any enclosed clubhouse. On a 140-site park these might total 6,000 square feet against 25 acres of improved ground.

The Five-Year Components

Electrical pedestals themselves, water and electric meters, laundry equipment, pool pumps and filtration and heating equipment, WiFi network infrastructure and access points, gate and access control systems, cameras, propane dispensing equipment, store fixtures and coolers, golf carts and maintenance equipment, and playground apparatus are five-year personal property.

WiFi is worth calling out. Modern parks compete on connectivity, and a mesh network covering 25 acres with fiber backhaul, distribution nodes, and access points is a real capital item, not an afterthought. It is five-year property.

Campgrounds Are Operating Businesses

This is the structural advantage. Under Treasury Regulation Sec. 1.469-1T(e)(3)(ii)(A), an activity is not a rental activity where the average period of customer use is seven days or less. RV parks and campgrounds overwhelmingly meet this, since the average stay is measured in nights.

Where the activity is not a rental activity, the passive loss analysis under IRC Sec. 469 turns solely on material participation under Treasury Regulation Sec. 1.469-5T. An owner-operator running the park clears the 500-hour test. Even a semi-absentee owner can often qualify under the 100-hour and substantially-all test or the facts and circumstances test.

The result is that a large first-year deduction from a campground study is generally non-passive and available against wages, business income, and other active income immediately. This is the same mechanism that makes short-term rentals attractive, applied to a much larger asset.

Longer-stay parks are the exception. A park catering to monthly and seasonal residents may have an average customer use period well above seven days, and would then be evaluated as a rental activity under the ordinary rules. Average stay data should be pulled from the reservation system, not estimated.

Worked Example: 140-Site Park

An operator acquires a 140-site RV resort for $8,900,000. Land is allocated at $1,600,000, leaving $7,300,000 depreciable. The average stay is 4.2 nights.

The study identifies five-year property of $949,000 (13%), fifteen-year land improvements of $4,672,000 (64%), and 39-year structure of $1,679,000 (23%).

Reclassified basis of $5,621,000 is deductible in year one under IRC Sec. 168(k), plus $43,051 of structural depreciation, for approximately $5,664,051 in year one.

Because the average stay is under seven days and the owner materially participates, the loss is non-passive. At a 37% marginal rate the first-year federal benefit is roughly $2.1 million, usable against other active income rather than suspended.

Development and Expansion Costs

Parks expand constantly, adding sites, upgrading pedestals from 30 to 50 amp, extending utility runs, and building amenities. Each expansion is a new placed-in-service event with its own bonus eligibility.

This is a recurring benefit rather than a one-time event. An operator adding 30 sites a year at $28,000 per site of improvement cost is generating roughly $840,000 of predominantly 15-year, bonus eligible basis annually. Tracking those additions at the component level rather than lumping them into a single land improvement account also preserves partial asset disposition elections under Treasury Regulation Sec. 1.168(i)-8 when components are later replaced.

Recapture and Exit Planning

With 13% of basis in Sec. 1245 property and 64% in Sec. 1250 land improvements, the recapture profile is mixed. Sec. 1245 property recaptures fully as ordinary income. Land improvements are Sec. 1250 property, and because they are depreciated on a straight-line basis under MACRS, there is generally no Sec. 1250 recapture, though unrecaptured Sec. 1250 gain at 25% applies.

That is a materially better exit profile than a car wash or gas station with half its basis in equipment. Operators planning a five to seven year hold should still model the exit, but campgrounds carry less recapture drag than most heavily reclassified assets.

Frequently Asked Questions

Why do RV parks reclassify 55% or more?

Because the asset is site work rather than building. Pads, roads, buried utilities, pedestals, and amenity hardscape are all 15-year land improvements under IRC Sec. 168(e)(3)(C). The only 39-year components are typically an office, bathhouse, and laundry building.

Is an RV park a passive activity?

Usually not. Under Treas. Reg. Sec. 1.469-1T(e)(3)(ii)(A), an activity with an average customer use period of seven days or less is not a rental activity. Campgrounds almost always meet this, so only material participation under Treas. Reg. Sec. 1.469-5T applies and the loss is generally non-passive.

What if my park is mostly monthly and seasonal residents?

Then the average stay likely exceeds seven days and the activity is evaluated as a rental. Pull the actual average customer use period from your reservation system rather than estimating, because this single fact determines whether the deduction offsets active income.

Are electrical pedestals five-year or 15-year property?

The pedestal units, meters, and receptacles are five-year equipment. The buried distribution lines, conduit, and transformers feeding them are 15-year land improvements. A proper study splits these rather than treating the electrical system as one item.

Does expanding the park create new deductions?

Yes. Every expansion phase is a separate placed-in-service event with its own bonus depreciation eligibility. Since expansion costs are predominantly 15-year land improvements, an operator adding sites annually generates a recurring stream of fully bonus eligible basis.

Cost Segregation for RV Parks and Campgrounds: Site Work Is the Whole Asset