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Level 1
posted Mar 2, 2026 1:39:26 PM

Cost Segregation study that requires Form 3115

Hello, I just received the reports from my Cost Seg study for a property that I originally purchased in 2022, started using as a short - term rental in late 2022, 2023 and 2024.  Then I renovated the property and now have the cost segregation results on the renovated property including an additional separate building.  The resulting house and new smaller house are the subject of the Cost Seg study.    My study shows a Total Project Cost, A Project Cost Disposed and a New Basis after Disposition.

Since I had depreciated the property for 3 years prior to the renovation and cost segregation study, I understand I need to submit form 3115 to adjust the prior depreciation deductions.

How do I enter this data into TurboTax?

Do I EDIT the existing basis numbers for the original house?

Do I zero out the original basis numbers and then ADD assets in categories for 5-yr, 15-yr and 39-yr?

Am I trying to agree to the Total Building Cost? Or to the New Basis after Disposition?

Will TurboTax prompt me to complete an IRS Form 3115?

Does Form 3115 require that I mail it in hardcopy?

Thank you!

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1 Replies
Employee Tax Expert
Mar 2, 2026 3:36:28 PM

No you will not be prompted to complete Form 3115 by TurboTax. Before you begin to make any adjustments or changes please review the following.

  1. Keep the information for all depreciable assets before the study (2024). This will provide the depreciation already used on prior years and allow you to calculate the depreciation not yet used prior to 2025.
  2. Yes, you can edit the existing cost basis and collect the total depreciation you have not previously used. 
  3. No, do not zero out the existing basis for the rental house however if part of that cost is now designated to the smaller house, you will change the cost basis based on the study. It's up to you if you want to show two rental units now splitting the cost appropriately.
  4. Residential Rental property is 27.5 year, while nonresidential property (includes short term rentals) is 39 years.

Once you have the calculations for depreciation expense not previously used this amount will be entered on Form 3115. Continue to review all the instructions below.

 

The rule is as follows - To file IRS Form 3115 for an automatic accounting method change, you must file in duplicate: 

  1. attach the original, unsigned form to your timely filed federal tax return (including extensions), and
  2. mail a signed copy to the IRS National Office or Ogden, UT office.

Next, for the prior depreciation you have not used.  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. Keep in mind that even if you prepare the form 3115 in TurboTax, you will need to manually include the Section 481(a) adjustment to your return (see below).
    • 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 (see options below). 

The depreciation will not link from Form 3115 to your Schedule E (as indicated above). Be sure to get the total accumulated depreciation prior to 2025, and enter that number on your Schedule E under 'Any Miscellaneous Expenses' then use the description F3115 Section 481(a), then add the amount. Your depreciation schedule will maintain the information for each asset for future use.

 

You can change to TurboTax Desktop if you choose.

Additional options to consider: 

  • While form 3115 is not supported in TT, you can include the adjustment amount in your tax return and still e-file your tax return.
  • You would then need to complete form 8453, check the form 3115 box and mail both of these forms to the address on the instructions.  If you do this, make sure to send the envelope certified mail.
  • Not necessarily advocating this method, for the simple fact the IRS staff is down in staff and just not sure of all the logistics given the reduction in staffing.
  • If you decide to mail both the return with the form 3115, I also recommend you send this envelope certified mail as well.

Please update if you have additional questions or need further assistance.

 

@7037851231

[Edited: 03/02/2026 | 3:37 PM PST]