Can I amend returns going back several years to report on rental income AND associated deductions?

Forum|Forum|3 years ago
April 13, 2023
1 reply
0 views

I have co-owned a small rental property with others for 10 years. I have never reported anything about it on my tax returns, thinking that it just generated losses anyway (mortgage interest + taxes + condo assn fees + depreciation have always exceeded the rental income). I'm now realizing I should have reported--that when we ultimately sell, I'll have to reduce the basis by the depreciation anyway, so I may as well have been accumulating the passive activity losses to offset the gain. I will at least start reporting this year (and figure depreciation based on an in-service date of 10 years ago). Question is: how far back should amend? And,if I amend for years in which I filed more than 3 years ago, may I only report the rental income, or will I also be able to report the mortgage interest, property taxes, condo fees and depreciation? If I report all the deductions, would the resulting losses (and there would be losses each year) be able to be carried forward?

DavidD66

Instead of filing amended returns for 10 years, I recommend you amend 2021 and file Form 3115 - Application for Change in Accounting Method. Take all the depreciation and back expenses in a single year. TurboTax does not support Form 3115, so you want be able to use TurboTax to file Form 3115. I strongly recommend you have a local tax professional with experience filing Form 3115 for rental property.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

birdieblueAuthor

Thank you for the response. Form 3115 does make sense for the depreciation. But, won’t I have to amend previous returns to take into account the rental income? I will look into hiring an accountant.

DianeW777

The Internal Revenue Service limits the amount of time you have to file a 1040-X to the later of three years from the date you file the original tax return, or two years from the time you pay the tax for that year. There is a statue of limitations when a tax return has already been filed with the IRS.

IRS Presentation on Statute of Limitations

I would advise the same as @DavidD66 in regards to filing Form 3115 and using a tax professional to assist with your situation. Going forward, after amending 2021, you should be fine handling it on your own.

@birdieblue

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"