positive 481a adjustment

[cnxjo]

I have a positive 481(a) adjustment due to prior incorrect rental depreciation.  Where do I enter this amount?  There is no place to enter "other income" on schedule E.  It will also not allow me to enter a negative value in "other expenses".  What are my options?

a.  add the positive adjustment to the amount shown on 1099-MSC and enter the sum as the total rent income?

b.  enter the positive adjustment in schedule 1 as "other income"?

[DianeW777]

It depends. If you are saying you previously used more depreciation than you should have then you could add the difference as part of your income under 'Cash...etc.' Be very deliberate in your recordkeeping, it will be very important at sale.

It's quite uncommon to uses the Form 3115 for the section 481(a) adjustment unless there is depreciation that was not used due to an error. If that is the case you should follow the steps here.

• Be sure to get the total accumulated depreciation prior to 2025, subtract that from the total prior depreciation in your 2024 return, then enter that number on your Schedule E under 'Any Miscellaneous Expenses' then use the description F3115 Section 481(a), then enter the amount. Your depreciation schedule will maintain the information for each asset for future use.