Investors & landlords
Take all missed depreciation in the current year. The depreciation expense under tax law is 'allowed or allowable'. Simply put, if you had depreciable property, regardless of if you used the depreciation, it must be recaptured at the time of disposition (sale). The good news is that you can take the amount missed as an expense on the current tax return without amending any prior year.
For the prior depreciation you have not used. At the point of sale, you will recapture any depreciation that was allowed or allowable.
- You can use the following form to correct the depreciation for your rental property. Take any amount not previously expensed on prior returns, as an expense on the current year tax return as 'Other Expenses'.
Form 3115 Instruction: By including this with the current year tax return, you can complete everything on the 2024 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.
- TurboTax doesn't help you with this form, however it is available in both TurboTax Online and TurboTax Desktop. 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 Desktop if you choose.
The chart for 27.5 year residential rental property is shown below for your convenience. it can also be found in IRS Publication 946.
