I found my depreciation basis was too high last year (1st year to depreciate). Should I continue to use the same basis to calculate this year or can I adjust the basis to the lower one?
2nd question: I remodel my ADU as rental property in 2019. Should I add up the renovation cost into my basis or separate as a new assets to depreciate? If I added it up, can I adjust the amount from previous year to correct it? For example, I used $100,000 as improvement basis to depreciate by using S/L 27.5 years, which should be $80K. This year, I spent $70K to renovate my ADU. Can I use $80K + $70K = $150K as my basis in 2019 to depreciate?
File an amended return for last year right away if you deducted too much depreciation.....don't file a return for this year until you've amended last year's return or you'll have to file a form 3115. Separate the renovation and depreciate the cost over 27.5 years.
Thank you for your quick response. My accountant filed an amend once for me in 2017 for 2016 for investment gain and she put it as loss. Now I have to amend my 2018 for depreciation. Will that raise IRS’s attention to a bigger chance audit me?
Also, which amend form should I use and can you please be so kind to send me link to access it? Can I do amend in TurboTax by e-file?
First amending a return does not increase your audit chances... and there is only one amendment form 1040X.
How to amend (change or correct) a return you already filed
You can amend returns that have been accepted by the IRS. If your return is pending, you won't be able to make any changes until it's accepted or rejected by the IRS. If you don't know your e-file status, we can help you check it.
Select a tax year for specific amending instructions.
Keep in mind: You have 3 years from the date you filed your return (or 2 years after you paid the tax due, whichever is later) to file an amended return, which means you don't have to get it done by the April 15 filing deadline.