Missed Depreciation on Your Rental? Form 3115 Fixes Years at Once

Yes. A look-back study reclassifies the building components as of the original placed-in-service date, and Form 3115 (a change in accounting method) lets you claim ALL the depreciation you should have taken, in one catch-up deduction on the current return. No amended returns, no reopening old years.

The one-time catch-up that reconciles what you actually deducted with what the new method says you should have deducted since day one. For a look-back cost seg, that difference is typically a large negative adjustment, an extra deduction, taken entirely in the year of change for taxpayer-favorable adjustments.

Depreciation corrections of this kind generally qualify for automatic consent: you file Form 3115 with the current-year return (plus a copy to the IRS), following the current automatic change procedures, and no advance approval or user fee is required. Automatic does not mean casual; the form, the computation, and the study behind it need to be done properly.

Yes, and it matters more than people realize: when you sell, recapture is computed on depreciation "allowed or allowable," meaning you pay recapture on deductions you never took. Two or more years of missed depreciation is an accounting method that Form 3115 can correct with a full catch-up; a single missed year is generally fixed by amending instead.

When the remaining ownership window is short (you repay the benefit through recapture at sale soon anyway, unless a 1031 or step-up is planned), when the passive loss rules would strand the deduction (no STR/REPS/passive income to absorb it), when the excess business loss cap defers most of it, or when the property is small enough that study plus preparation fees eat the benefit. It is a model, not a reflex.

The automatic-change procedures exist precisely so routine depreciation corrections happen without examination; you are using the system as designed, with computations attached. What draws scrutiny is not the form but sloppy execution: a 481(a) number with no engineering study behind it, or a change filed for a property whose facts do not support the reclassification. A properly supported 3115 is among the most routine filings in real estate tax.

Generally no; the method change belongs to a year you still hold the property, and the disposition itself trues up depreciation through the gain computation under the allowed-or-allowable rule. If you sold last year having never depreciated properly, the fix runs through the sale-year reporting, sometimes by amendment, and the sooner it is reviewed the more options remain open.

Two copies of Form 3115: one attached to your timely filed return (extensions count) for the year of change, and a duplicate sent to the IRS separately, with the 481(a) computation and the supporting study in your files. There is no user fee for automatic changes. The practical timeline: engage the study early enough that the engineering, the computation, and the return preparation are not all colliding in the first week of April.

Yes, as part of a paid engagement. We evaluate the engineering report, confirm the method change qualifies as automatic, prepare Form 3115 with the Section 481(a) computation, and file it with your return plus the required duplicate copy. Taxstra serves real estate investors in all 50 states.

Not automatically. The 100% rate restored in 2025 applies to property acquired after January 19, 2025. Components of an older building take the bonus rate for the year it went into service: 100% for 2022, 80% for 2023, 60% for 2024.

For most investors, yes. Unless you qualify as a real estate professional or the property meets the short-term rental rules, the catch-up adds to passive losses that carry forward until you have passive income or sell the property.