Failed to take depreciation on sold rental property

[Mark_NC]

Didn’t take depreciation on a rental property.  Sold it a year ago.  How to claim depreciation, if possible?  Does this still require submitting a paper form to the IRS?

[Anonymous_]

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035791

Form 3115 needs to filed with your return and a separate, signed copy sent to the IRS, An adjustment for foregone depreciation is made on this form and then reported on your return (1040).

You will probably need a tax professional for this scenario.

See https://taxexperts.naea.org/expertdirectory

[ThomasM125]

You have two choices in determining how you can claim depreciation that you failed to report in previous years. You can file an amended return for the effected years if allowed (you can only go back three years for this) or you can file IRS Form 3115 that will allow you to apply for a change in accounting method. If you file form 3115, you can report the missed depreciation in the current tax year.

If you decide to file Form 3115, be mindful that you can’t use this method for making a late section 179 expensing election, or to change the date an asset was placed into service, or to change the designated use of an asset.

On form 3115, you need to complete the entries on page 8 "Schedule E - Change in Depreciation or Amortization". In part I(a), the DNC code is "7", used to note a change in depreciation method from an impermissible method. You will need to complete the "Information for All Requests" on pages 1 to 3.

You can only prepare Form 3115 in the desktop version of TurboTax. You can find the form by entering the form number in the "Open Forms" box you will find in the Forms Menu. Here is a link to an article that you may find helpful: Reclaim depreciation missed in previous years

[Anonymous_]

If the taxpayer uses an impermissible method of determining depreciation for two or more consecutively filed tax returns, Form 3115 must be file to make a correction; amended returns will not work in that scenario.

See https://www.irs.gov/publications/p946#en_US_2022_publink1000107383

Adoption of accounting method defined.

Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns.