Home office depreciation catch up

[mpr71]

I have a home office which I began using in 2020. When doing my 2025 taxes I realized I should be taking a depreciation deduction for the furniture. My understanding is that when I enter this information into TT it should take a deduction for all the depreciation not claimed in previous years in the current tax year 2025 (6 years of depreciation). I understand I may need to file form 3115.

TT does not seem to be doing this. For example for a $3,500 item it takes $1,400 of depreciation, but the MACRS schedule, which it correctly generates shows closer to $3,000. I don't understand what TT is doing here, and if this is correct. If my understanding is correct how do I get TT to cooperate ?

[taxmodern]

The first thing you need to be aware of is that it depends on whether you used the actual expense home office method or the simplified home office method. If you used the method in TurboTax where you just enter square footage and it calculates a deduction based on that, then you are using the simplified home office method, which doesn't allow you to additionally add other home office expenses like furniture.   If you did use the simplified home office method on a previously filed tax return, you cannot change that election retroactively, so in that case you are stuck with that for that tax year.

If you are using the actual expense method, then you can add expenses for your home office for things like furniture. TurboTax won't automatically claim the past depreciation for the past years because you can only claim the current year's depreciation.   You can use form 3115 to claim past missed depreciation. However,  form 3115 if a complicated form with additional required attachments you need to add to it, and it's unlikely to be worth the time and/or expense to go through that process to claim past home office furniture.  You do have the option to file an amended return to claim missed depreciation for only the previous tax year (you can't go back more years than 1 to claim past missed depreciation). 

One other caveat to be aware of is that you can only claim a deduction for the home office if the associated business has a taxable net profit for the current tax year.  So if it's a home office for a rental property, for example, with negative taxable income for the year, then the home office deduction wouldn't reduce your current year taxes anyway.  

[mpr71]

Thanks David,

I think I've mostly figured this out. TT desktop does allow you to file form 3115, it just won't fill it out for you. 

I've entered the result of the 481(a) adjustment on lines 48 and 27b of Sch C (via the relevant TT question about other expenses). 

The only thing which is slightly awkward is that 3115 requires attaching an explanation of certain things which can't be done in TT afaik. So something has to be printed out and filed, but the IRS requires submitting 3115 by mail also. It would be great if you or someone else could confirm this was the right approach.

At this point I'm more curious what TT is doing when you tell it you have assets brought into service several years ago for which no prior depreciation has been claimed. It does allow more depreciation but not the amount computed via MACRS. (To be clear, that's not what I'm doing for the filing. I'm telling TT prior depreciation was applied, and then taking the extra deduction via 481(a) on 3115). 

[taxmodern]

Yeah, TurboTax Desktop does let you fill out a 3115 in forms mode.  But as you mentioned, providing the attached statements is the challenging part. You could paper file your whole return and attach the statements to that.  Or if you want to e-file, which is probably a better choice, you can then mail in a Form 8453 to submit the Form 3115 attachments to the IRS by mail separately from the e-filed return.  And then, as you mentioned, you do also have to mail a copy of the Form 3115 to the IRS as well, as explained in the instructions for that form. 

I haven't experimented with what TurboTax does when you put in a past placed in service date for an asset, but I would imagine it would just compute the current year depreciation.