Using Form 3115 to claim missed depreciation on a rental property

[LINGX]

Hi, I just realized I didn't enter depreciation information in all previous years' filing. The rental property was purchased in 2016 and has been in rental use since then. It looks like I need to use form 3115? But when I followed the steps outlined by TurboTax help website, after step 4, the property address defaulted into the form is my primary home, not the rental property address. It didn't look like I can override/change that address info.  Thoughts? 

***Below is the steps I found from TT Help website ********

In TurboTax Desktop:

1. Select View from the top toolbar
2. Then select Forms
3. Select Open Form and  type 3115
4. Select Form 3115, p1-3: Change in Accounting Method and select Open Form
5. Complete these lines and boxes:
   1. Tax year of change: Enter current year
   2. Type of applicant: Choose what type of entity you are
   3. Type of accounting method change: Select Depreciation or amortization
   4. Part I: For question 1(a) DCN: Type in 7
   5. Answer questions 2 and 3
   6. Part II: Answer questions
   7. Part IV, question 25: Select No (to get to Part IV, you might have to select QuickZoom at the bottom of the form)
   8. Question 26: Enter the depreciation adjustment amount 
   9. Question 27: Answer No
   10. Answer question 28
   11. Skip to Page 8, Schedule E Change in Depreciation or Amortization and complete the section (you might have to select QuickZoom at the bottom of the form again)

[tagteam · Accepted solution]

That should be the name on your return (1040), not the address of the rental property.

Note that you need to attach a statement describing the property (i.e., your rental) and showing your calculations for the adjustment.

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035827

You need to attach a copy of Form 3115 to your return and you also need to send a signed copy to the IRS National Office (see the instructions for the correct address).

See https://www.irs.gov/instructions/i3115#en_US_202212_publink63215hd0e217

Note that, although the form is included in TurboTax, it's not really a DIY scenario.

[LINGX]

Thank you for the reply. Then, I noticed that in the step-by-step guide, the software was asking (1) when was the rental property purchased [in my case, 2016] (2) when was it in service (3) was it 100% in service [I can answer yes to this question], and (4) how much depreciation has been taken in prior years. So in my case, if I answer those 4 questions with $0 depreciated before, will the software automatically compute the catch-up depreciation for the 2016 to 2022 period? Thanks. 

[tagteam]

You can have the program calculate the depreciation during that period by entering the basis and the date the property was placed in service.

[LINGX]

So, essentially you are saying that in lieu of filling out form 3115, in my 2022 tax filing I can provide the purchasing price, date placed in service, previous depreciation deducted which is $0, and the software will be smart enough to calculate all the depreciation I should've taken from 2016 to 2022 and include the amount in 2022 tax filing? Thanks. 

[tagteam]

No, not in lieu of filling out Form 3115, just as a calculator (of sorts) to determine the amount of depreciation you missed. 

You could even start a test return for that purpose (use the Rental Properties and Royalties section).

[LINGX]

Oh got it, thank you so much for answering all my questions. 

[LINGX]

Sorry one more question. So I've filled out Form 3115 and computed all the missed rental property appreciation from Oct. 2016 to tax year 2021. I see that the software calculated the depreciation amount for tax year 2022. But where do I entered the missed total amount for 2016 to 2021? Enter it as a misc. expense in the rental property expense section? 

[tagteam · Accepted solution]

Other expenses should work.