Although depreciating a rental property is voluntary, the IRS doesn’t see it that way if you sell. The IRS will assume at the time of a sale that you have been taking the deduction and will expect you to pay a depreciation recapture tax, if necessary.
If you failed to calculate the depreciation when you should have, you can file amended tax returns for mistakes going back up to three years. For older errors, you’ll need to complete IRS Form 3115, or the Application for Change in Accounting Method.
In any event, the rules governing depreciation and deductions for rental properties can get very technical, and they do sometimes change. For those reasons, an investor needs to work with a tax accountant on managing the tax treatment of any rental property.
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