Investors & landlords
Yes, you can count on TurboTax calculations for your prior depreciation. Keep track of it because whether you use it or lose it, it will be part of the sale in the future.
I will reiterate what @DavidD66 stated in regards to doing an amendment for the couple of years you have rented it and did not take depreciation. That's your easiest option and you can complete 2023 as if you had taken prior depreciation, it will not change 2023 tax return regardless of what you do.
You will be able to access and file an amended return now (Form 1040-X). Be sure to read all the instructions carefully, before you begin, so that TurboTax knows the original numbers and the changed numbers for your amendment.
- How to amend (change or correct) a return already filed?
- What is the deadline for filing an amended return?
- How to file an amended return with the IRS
If you do decide to use Form 3115, you only use it once and there is no need to file it again once you have calculated the depreciation for the entire period.
Depreciation on the rental property itself will be depreciated using the straight line method, with a mid-month convention over 27.5 years. This simply means the property has an even monthly amount for the life of the property (27.5 years) with the exception of the first and last month which is calculated at a half month (mid-month). A quick calculation for a full year is the cost basis x .03636. See the chart below.
Form 3115 Instruction: By including this with the current year tax return, you can complete everything on the 2023 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.
