Sometimes a different method is chosen versus the normal or general method of depreciation. It's important to review all of your prior tax returns to see what method your CPA had chosen for your rental property. Also make sure you aren't looking at the land value versus the rental house cost basis itself because it would have been separated out. Land is always appreciable so for this reason it can never be depreciated.
- General Depreciation System (GDS) would be 27.5 year recovery (life)
- Alternative Depreciation System (ADS) recovery period was changed from 40 years to 30 years for residential rental property placed in service after Dec. 31, 2017, but remained 40 years for property placed in service before Jan. 1, 2018.
As our awesome Tax Expert @ColeenD3 pointed out you are not allowed under tax law to change your depreciation or asset without permission by filing Form 3115. Once this form is filed with the tax return you can deduct any and all depreciation that was previously unused, if that is the case.
Form 3115 Instruction: By including this with the current year tax return, you can complete everything on the 2021 tax return.
- Adopt a change in accounting method: This option allows you to go back as far as you need. Make the adjustment on your current year tax return to expense the missing depreciation.
- Why am I adopting a change in accounting method? Not claiming depreciation in two or more years indicates that you've chosen an accounting method without depreciation. In this case, you must now elect to change your accounting method to include depreciation.
- You must use the TurboTax CD/Download version to complete this form. TurboTax does not help you with this form. And your return must be mailed because this form is not supported through e-file.
This must be completed and filed with the return on time.
You can change to TurboTax CD/Download if you choose.
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