topic depreciation from priors years in Deductions & credits

depreciation from priors years

kivgolan — Wed, 31 Mar 2021 02:33:50 GMT

Can I deduct not taken a depreciation from priors years on current tax year on " Nondeductible expenses from Prior Years" Turbo Tax screen?

Re: depreciation from priors years

JohnB5677 — Wed, 31 Mar 2021 12:34:42 GMT

No. To take the depreciation that was not taken in prior years you will have to file an amendment for each year. This is because it will produce a different taxable amount in each year.

Because the IRS allows a taxpayer to deduct the depreciation of an asset from the taxpayer's ordinary income, the taxpayer has to report any gain from the disposal of the asset (The depreciation) as ordinary income, not as a capital gain.

You might think that if I don't take the depreciation, I won't have to pay that in the end, but it doesn't work that way.

The IRS says that they can claim depreciation recapture on any allowable depreciation, regardless of whether or not you took depreciation.

So, if you don’t take depreciation, you’ll still have to pay tax on the depreciation recapture. May as well get the benefit of depreciation if you’re going to have to pay for depreciation recapture.

Here is how to amend your tax return.

Some quick ground rules:

Be sure the original return was filed and accepted.
DO NOT go back into the return or change anything before you start the amendment process.
Gather everything you need before you start.
Before you start be sure to save a copy of the original return in a safe place.
Complete the entire amendment process before you log out.
Save the amended return under a different name.

You can correct a return that you've already filed and had accepted. Select the year that applies and use this guide to proceed.

Select your tax year for amending instructions:

For additional information please refer to How to Amend

Re: depreciation from priors years

Rick19744 — Wed, 31 Mar 2021 14:20:03 GMT

I don't agree with @JohnB5677 response regarding amending prior returns.

Essentially what has happened is you have an incorrect method of accounting for those items that you did not depreciate. As a result, you will need to file Form 3115 to correct this and claim any depreciation not taken in those years. When completing Form 3115, you will compute a Section 481(a) adjustment and this will be used in the current year tax return. This can be fairly complicated, so I would recommend meeting with a tax professional to help you in this area.

Generally you need to request consent from the IRS to change from an incorrect method to a correct method, however, there are several areas where the consent is automatic. A change for missed depreciation is one of those areas. However, you need to be able to cite the correct authority when filing the Form 3115 and a tax professional will be able to help you there.