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).
First add the capital improvements into your tax return with the correct date placed in service. This will provide the correct amount of depreciation for
Next, 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.
- You must use the TurboTax Desktop to complete this form. TurboTax doesn't 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 Desktop if you choose.
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